What changed in this filing

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Item 1. Business

2022-02-25 compared with 2021-02-25 · 47 added, 34 removed, 117 unchanged (41% of the section changed)

2 unchanged sentences

Our principal executive offices are located in Lisle, Illinois.

We design, manufacture, and sell a broad line of sensors, connectivity components, and actuators primarily to original equipment manufacturers ("OEMs") and tier one suppliers for the aerospace and defense, industrial, information technology, medical, telecommunications, and transportation markets.

Our vision is to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world.

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Our products perform specific electronic functions for a given product family and are intended for use in customer assemblies.

Our major products consist principally of sensors and actuators used in passenger or commercial vehicles, connectivity components used in telecommunications infrastructure, information technology and other high-speed applications, switches, temperature sensors, and potentiometers supplied to multiple markets, and fabricated piezoelectric materials and substrates used primarily in medical, industrial, aerospace and defense, and information technology markets.

Our major products consist principally of sensors and actuators used in passenger or commercial vehicles, connectivity components used in telecommunications infrastructure, information technology and other high-speed applications, switches, temperature sensors, and potentiometers supplied to multiple markets, and fabricated piezoelectric materials and substrates used primarily in the medical, industrial, and aerospace and defense markets.

The following table identifies major products by industry.

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Aerospace and Defense

Telecommunications and IT

% of consolidated net sales

CTS CORPORATION 4

In the above table, Telecommunications & IT are included in the Industrial end-market for all periods presented.

MARKETING AND DISTRIBUTION

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Approximately 92% of 2021 net sales were attributable to our sales engineers.

CTS CORPORATION 4

Our sales engineers generally service our largest customers with application-specific products.

A vast majority of our products are engineered solutions.

The sales engineers work closely with major customers in designing and developing products to meet specific customer requirements.

We utilize the services of independent manufacturers' representatives for customers not serviced directly by our sales engineers.

In 2021, independent distributors accounted for approximately 6% of net sales.

We use distributors for a small portion of our product portfolio that are standard and require less design support, to service smaller customers, and to provide supply chain fulfillment for certain customers.

Our key distribution partners include large global and regional distributors such as Avnet, Inc., Digi-Key Electronics, Master Electronics, Future Electronics, and TTI, Inc.

In addition, we also utilize the services of independent manufacturers' representatives for customers not serviced directly by our sales engineers.

Independent manufacturers' representatives receive commissions from us.

During 2021, approximately 2% of net sales were attributable to independent manufacturers' representatives.

We also use independent distributors.

Independent distributors purchase products from us for resale to customers.

In 2020, independent distributors accounted for approximately 6% of net sales.

RAW MATERIALS

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The price and availability of raw materials and manufactured components is subject to change due to, among other things, new laws and regulations, global economic and political events including strikes, and public health and safety concerns.

The continued uncertainties due to the COVID-19 pandemic may adversely affect our ability to source materials.

Because of the COVID-19 pandemic, we have experienced supply chain disruptions as well as supply inflationary pressures in fiscal 2021.

In particular, semiconductor and resin shortages have impacted our OEM customers’ ability to finish assembly of vehicles, which in turn have adversely impacted our results of operations and cash flows.

These pressures are expected to continue in fiscal 2022.

PATENTS, TRADEMARKS, AND LICENSES

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MAJOR CUSTOMERS

Sales to our 15 largest customers as a percentage of total net sales were as follows:

Years Ended December 31,

Total of 15 largest customers / net sales

Our net sales to significant customers as a percentage of total net sales were as follows:

1 unchanged sentence

Toyota Motor Corporation

Honda Motor Co.

We sell parts to these three transportation customers for certain vehicle platforms under purchase agreements that have program lifetime volume estimates and are subject to purchase orders issued from time to time.

CTS CORPORATION 5

We sell parts to these two transportation customers for certain vehicle platforms under purchase agreements that have program lifetime volume estimates and are subject to purchase orders issued from time to time.

No other customer accounted for 10% or more of total net sales during these periods.

We continue to focus on broadening our customer base to diversify our end market exposure.

CTS CORPORATION 5

Changes in the level of our customers' orders have, in the past, had a significant impact on our operating results.

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ORDER BACKLOG

Order backlog is comprised of firm open purchase orders we have received from our customers and generally represents 1 to 2 months of sales for certain products.

Order backlog is comprised of firm open purchase orders we have received from our customers and generally represents one to two months of sales for certain products.

Our business is a mix of purchase order-based business, shorter-term contracts, and multi-year awards, such as with customers who serve the automotive end market.

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manufacturing facilities are located in China, Czech Republic, Denmark, Mexico, Philippines, and Taiwan.

Additional information regarding the Company’s sales by geographic area and long-lived tangible assets in different geographic areas is included in Note 20 - Geographic Data.

Additional information regarding the Company’s sales by geographic area and long-lived tangible assets in different geographic areas is included in Note 20 - Geographic Data of this Annual Report on Form 10-K.

CTS CORPORATION 6

HUMAN CAPITAL RESOURCES

We employed 3,786 people at December 31, 2020, with 87% of these employees located outside the U.S.

We employed 3,570 people at December 31, 2019 with 84% of these employees located outside the U.S.

We are committed to building a diverse, inclusive and engaged workforce.

HUMAN CAPITAL MANAGEMENT AND OUR CULTURE

We employed 3,820 people as of December 31, 2021, with 86% of these employees located outside the U.S.

We employed 3,786 people as of December 31, 2020, with 87% of these employees located outside the U.S.

We are committed to building a diverse, inclusive and engaged workforce across our organization.

We have a global business, and our employees reflect the diversity of our geographic footprint.

We promote and maintain a culture of respect and appreciation of differences in our employees.

Our management teams and all of our employees are expected to exhibit the principles of fairness, honesty and integrity in the actions we undertake.

Our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination or unethical actions.

Our employees must adhere to a Code of Ethics that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting and stopping any type of unlawful discrimination or unethical actions.

A copy of our Code of Ethics is available for review on our Company’s website ctscorp.com.

We have a global talent review and succession planning process designed to align our talent plans with the current and future strategies of the business.

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In addition, we offer a broad range of company-paid benefits, which we believe are competitive in our industry.

The safety of our employees is a priority and vital to our success.

Our employees are regularly trained on safety-related topics and we monitor and measure our effectiveness at all of our locations.

During fiscal 2020, in response to the COVID-19 pandemic, we took action to protect our employees’ safety and health, including equipping employees with personal protective equipment, establishing minimum staffing and social distancing policies, sanitizing workspaces more frequently, adopting alternate work schedules including encouraging remote work arrangements, and instituting other measures aimed at minimizing the transmission of COVID-19 while sustaining production and related services.

The safety and well-being of our employees is a priority and vital to our success.

Our health and safety activities are overseen by our corporate environmental, health and safety function and are managed by employees in our locations, who coordinate on-site safety programs, resources, reporting and training in our locations.

Our employees are regularly trained on safety-related topics and we monitor and measure the effectiveness of our programs at all of our locations.

Throughout the ongoing COVID-19 pandemic we have taken action to protect our employees’ safety and health, including equipping employees with personal protective equipment, establishing minimum staffing and social distancing policies, sanitizing workspaces more frequently, adopting alternate work schedules including remote work arrangements, and instituting other measures aimed at minimizing the transmission of COVID-19 while sustaining production and related services.

In addition, we modified the way we conduct many aspects of our business to reduce the number of in-person interactions.

For example, we significantly expanded the use of virtual interactions in many aspects of our business, including customer facing activities.

We recognize that we have a responsibility to be a positive influence in the communities in which we do business around the world.

In the past most of our community involvement and charitable programs has been organized by our locations, which has helped to ensure that our efforts are working in support of the local communities in which our employees live and work.

However, in 2021, we further enhanced our commitment to community outreach and support through the launch of CTS CARES – our global program designed to support our charitable giving and community involvement initiatives.

The CTS CARES platform advanced this past quarter as our employees across the globe participated in several community activities and contributed to community projects.

EXECUTIVE OFFICERS OF THE COMPANY

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The following serve as executive officers of CTS as of December 31, 2021.

The executive officers are expected to serve until the next annual shareholders meeting, scheduled to be held on or about May 13, 2021, at which time the election of officers will be considered again by the Board of Directors.

Positions and Offices

3 unchanged sentences

Vice President and Chief Financial Officer

Scott D’Angelo

Vice President, General Counsel and Secretary

Kieran O’Sullivan – 59 – President, Chief Executive Officer and Chairman of the Board.

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O’Sullivan served as Executive Vice President of Continental AG’s Global Infotainment and Connectivity Business and led the NAFTA Interior Division, having joined Continental AG, a global automotive supplier, in 2006.

O'Sullivan is a member of the board of directors, the audit committee, and risk committee and the corporate governance and nominating committee of LCI Industries, a supplier of engineered components for manufacturers of recreational vehicles, manufactured homes, marine applications, and for the related aftermarkets.

O’Sullivan is a member of the board of directors of LCI Industries, a supplier of engineered components for manufacturers of recreational vehicles, manufactured homes, marine applications, and for the related aftermarkets, serving as the chairperson of the risk committee, and as a member of the corporate governance, nominating and sustainability and audit committees.

Ashish Agrawal - 51 - Vice President and Chief Financial Officer.

On November 11, 2013, Mr.

Agrawal was elected Vice President and Chief Financial Officer for CTS.

Agrawal was elected Vice President and Chief Financial Officer of CTS.

Agrawal joined CTS in June 2011 as Vice President, Treasury and Corporate Development, and was elected as Treasurer on September 1, 2011.

Before joining CTS, Mr.

Agrawal was with Dometic Group AB, a manufacturer of refrigerators, awnings and air conditioners, as Senior Vice President and Chief Financial Officer, Americas, since 2007.

Agrawal was with Dometic Group AB, a manufacturer of refrigerators, awnings and air conditioners, as Senior Vice President and Chief Financial Officer, Americas, beginning in 2007.

Prior to that, Mr.

Agrawal was with General Electric Co.

in various positions since December 1994.

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 2021 Annual Meeting of Shareholders.

in various positions beginning in December 1994.

CTS CORPORATION 7

Scott D’Angelo - 51 - Vice President, General Counsel and Secretary.

D’Angelo joined CTS in February 2021 and was elected General Counsel and Secretary on February 11, 2021.

Prior to joining the Company, Mr.

D’Angelo was a member of the International Commercial and Trade Practice Group of Baker McKenzie, LLP from March 2019 , and served as Vice President, Deputy General Counsel & Chief Compliance Officer of Fortune Brands Home & Security, Inc.

, a leading home and security products company, from May 2015 and, prior to that, served in several senior roles with McDonald’s Corporation.

Information with respect to the Company’s Directors and corporate governance policies and practices may be found in our definitive proxy statement to be delivered to shareholders in connection with our 2022 Annual Meeting of Shareholders.

Such information is incorporated herein by reference.

1 unchanged sentence

We are incorporated in the State of Indiana.

Our principal corporate office is located at 4925 Indiana Avenue Lisle, IL 60532.

CTS CORPORATION 7

Our principal corporate office is located at 4925 Indiana Avenue Lisle, Illinois 60532.

Our internet address is www.ctscorp.com.

We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission ("SEC").

Other than the documents that we file with the SEC that are incorporated by reference herein, the information contained on or accessible through our website is not part of this or any other report we file or furnish to the SEC.

Other than the documents that we file with or furnish to the SEC that are incorporated by reference herein, the information contained on or accessible through our website is not part of this or any other report we file or furnish to the SEC.

Investors and others should note that we announce material financial information to our investors using the Investors section of our website ( ctscorp.com/investors ), SEC filings, press releases, public conference calls and webcasts.

2 unchanged sentences

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 1. Business