FORM 10-Q
| FORM 10-Q |
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
CTS CORPORATION
(Exact name of registrant as specified in its charter)
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(Exact name of registrant as specified in its charter) |
| Indiana | 35-0225010 | |||
(State or other jurisdiction of incorporation or organization) |
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Three Months Ended Six Months Ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Net sales $ $ $ $ Costs and expenses: Cost of goods sold Selling, general and administrative expenses Research and development expenses Restructuring and impairment charges Operating earnings Other (expense) income: Interest expense Interest income Other Total other (expense) income Earnings before income taxes Income tax (benefit) expense Net earnings $ $ $ $ Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ Basic weighted – average common shares outstanding: Effect of dilutive securities Diluted weighted – average common shares outstanding Cash dividends declared per share $ $ $ $ Three Months Ended Six Months Ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Net earnings $ $ $ $ Other comprehensive (loss) earnings: Changes in fair market value of hedges, net of tax Changes in unrealized pension cost, net of tax Cumulative translation adjustment, net of tax Other comprehensive earnings $ $ $ $ Comprehensive earnings $ $ $ $ (Unaudited) June 28, December 31, 2015 2014 ASSETS Current Assets Cash and cash equivalents $ $ Accounts receivable, net Inventories, net Other current assets Total current assets Property, plant and equipment, net Other Assets Prepaid pension asset Goodwill Indefinite-lived intangible asset Other intangible assets, net Deferred income taxes Other Total other assets Total Assets $ $ LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ $ Accrued payroll and benefits Accrued liabilities Total current liabilities Long-term debt Post retirement obligations Other long-term obligations Shareholders’ Equity Common stock Additional contributed capital Retained earnings Accumulated other comprehensive loss Total shareholders’ equity before treasury stock Treasury stock Total shareholders’ equity Total Liabilities and Shareholders’ Equity $ $ Six Months Ended June 28, 2015 June 29, 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ $ Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Amortization of retirement benefit adjustments Equity-based compensation Restructuring charges Prepaid pension asset Gain on sale of fixed assets Changes in assets and liabilities, net of acquisitions and divestitures: Accounts receivable Inventories Accounts payable Accrued liabilities Income taxes payable Deferred income taxes Other Total adjustments Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Proceeds from sale of assets Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt Proceeds from borrowings of long-term debt Payments of short-term notes payable — Proceeds from borrowings of short-term notes payable — Purchase of treasury stock Dividends paid Exercise of stock options Other Net cash used in financing activities Effect of exchange rate on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ $ Supplemental cash flow information Cash paid for Interest $ $ Cash paid for Income taxes, net $ $ 30, 2016 2015. As of June 28, December 31, ($ in thousands) 2015 2014 Accounts receivable, gross $ $ Less: Allowance for doubtful accounts Accounts receivable, net $ $ As of June 28, December 31, ($ in thousands) 2015 2014 Finished goods $ $ Work-in-process Raw materials Less: Inventory reserves Inventories, net $ $ As of June 28, December 31, ($ in thousands) 2015 2014 Land $ $ Buildings and improvements Machinery and equipment Less: Accumulated depreciation Property, plant and equipment, net $ $ Three Months Ended Six Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Net pension income $ $ $ $ Domestic Pension Plans Foreign Pension Plans Three months: Three Months Ended Three Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Service cost $ $ $ $ Interest cost Expected return on plan assets (1) Amortization of loss Other cost due to retirement — — — (Income) expense, net $ $ $ $ Domestic Pension Plans Foreign Pension Plans Six months: Six Months Ended Six Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Service cost $ $ $ $ Interest cost Expected return on plan assets (1) Amortization of loss Other cost due to retirement — — — (Income) expense, net $ $ $ $ Three Months Ended Six Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Other postretirement benefit plan Service cost $ $ $ $ Interest cost Amortization of gain Postretirement expense $ $ $ $ As of June 28, 2015 ($ in thousands) Gross Accumulated Net Amount Amortized intangible assets: Customer lists/relationships $ $ $ Patents — Other intangibles Other intangible assets, net $ $ $ Amortization expense for the three months ended June 28, 2015 $ Amortization expense for the six months ended June 28, 2015 $ As of December 31, 2014 ($ in thousands) Gross Accumulated Net Amount Amortized intangible assets: Customer lists/relationships $ $ $ Patents — Other intangibles Other intangible assets, net $ $ $ Amortization expense for the three months ended June 29, 2014 $ Amortization expense for the six months ended June 29, 2014 $ ($ in thousands) Amortization 2015 $ 2016 2017 2018 2019 Thereafter Total amortization expense $ shipping. Actual costs Planned incurred through ($ in thousands) April 2014 Plan Costs June 28, 2015 Inventory write-down $ $ — Equipment relocation Other charges Restructuring related charges, included in cost of goods sold $ $ Workforce reduction $ $ Asset impairment charge — — Other charges, including pension termination costs Restructuring and impairment charges $ $ Total restructuring, impairment and restructuring related charges $ $ These restructuring actions Planned Actual costs ($ in thousands) June 2013 Plan Costs June 28, 2015 Inventory write-down $ $ Equipment relocation Other charges Restructuring-related charges, included in cost of goods sold $ $ Workforce reduction $ $ Asset impairment charge Other charges, including pension termination costs Restructuring and impairment charges $ $ Total restructuring and restructuring-related charges $ $ 30, 2016. As of June 28, December 31, ($ in thousands) 2015 2014 Accrued product related costs $ $ Accrued income taxes Accrued property and other taxes Dividends payable Remediation and monitoring reserves Other accrued liabilities Total accrued liabilities $ $ recorded. We do not have any known environmental obligations where a loss is probable or reasonably possible of occurring for which we do not have a reserve, nor do we have any amounts for which we have not reserved because the amount of the loss cannot be reasonably estimated. Due to the inherent nature of environmental obligations, CTS As of June 28, December 31, ($ in thousands) 2015 2014 Revolving credit facility due in 2017 $ $ Weighted average interest rate % % Amount available $ $ Total credit facility $ $ Standby letters of credit $ $ Commitment fee percentage per annum $10.8 million at June 30, 2016. Three Months Ended Six Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Unrealized loss $ $ $ $ Realized gain reclassified to interest expense $ $ $ $ As of June 28, December 31, ($ in thousands) 2015 2014 Accrued liabilities $ $ Other long-term obligations $ $ Gain (Loss) As of Gain (Loss) reclassified As of March 29, Recognized from AOCI June 28, ($ in thousands) 2015 in OCI to income 2015 Changes in fair market value of hedges: Gross $ $ $ $ Income tax (benefit) Net Changes in unrealized pension cost: Gross — Income tax (benefit) — Net — Cumulative translation adjustment: Gross — Income tax (benefit) — Net — Total accumulated other comprehensive (loss) income $ $ $ $ �� Gain (Loss) As of Gain (Loss) reclassified As of March 30, Recognized from AOCI June 29, ($ in thousands) 2014 in OCI to income 2014 Changes in fair market value of hedges: Gross $ $ $ $ Income tax (benefit) Net Changes in unrealized pension cost: Gross Income tax (benefit) Net Cumulative translation adjustment: Gross — Income tax (benefit) — Net — Total accumulated other comprehensive (loss) income $ $ $ $ Gain (Loss) As of Gain (Loss) reclassified As of December 31, Recognized from AOCI June 28, ($ in thousands) 2014 in OCI to income 2015 Changes in fair market value of hedges: Gross $ $ $ $ Income tax (benefit) Net Changes in unrealized pension cost: Gross — Income tax (benefit) — Net — Cumulative translation adjustment: Gross — Income tax (benefit) — Net — Total accumulated other comprehensive (loss) income $ $ $ $ Gain (Loss) As of Gain (Loss) reclassified As of December 31, Recognized from AOCI June 29, ($ in thousands) 2013 in OCI to income 2014 Changes in fair market value of hedges: Gross $ $ $ $ Income tax (benefit) Net Changes in unrealized pension cost: Gross Income tax (benefit) Net Cumulative translation adjustment: Gross — Income tax (benefit) — Net — Total accumulated other comprehensive (loss) income $ $ $ $ As of June 28, December 31, 2015 2014 Preferred Stock Par value per share No par value No par value Shares authorized Shares outstanding — — Common Stock Par value per share No par value No par value Shares authorized Shares issued Shares outstanding Treasury stock Shares held purchases. Six Months Ended June 28, 2015 June 29, 2014 Balance at the beginning of the year Repurchases Shares issued upon exercise of stock options Restricted share issuances Balance at the end of the period Three Months Ended Six Months Ended ($ in thousands) June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Service-Based RSUs $ $ $ $ Performance-Based RSUs Market-Based RSUs Total $ $ $ $ Income tax benefit $ $ $ $ Unrecognized compensation Weighted- expense at average ($ in thousands) June 28, 2015 period Service-Based RSUs $ years Performance-Based RSUs years Market-Based RSUs years Total $ 2014 Plan 2009 Plan 2004 Plan 2001 Plan Awards originally available Stock options outstanding — — — — RSUs outstanding — Options exercisable — — — — Awards available for grant — CTS Six Months Ended June 28, 2015 Weighted Average Exercise Options Price Outstanding at beginning of year $ Exercised $ Outstanding at end of period — $ — Exercisable at end of period — �� $ — on our current forecast. Six Months Ended June 28, 2015 Weighted Average Grant Date Units Fair Value Outstanding at January 1, 2015 $ Granted Converted Forfeited Outstanding at June 28, 2015 $ Target Vesting Vesting Units Grant Date Units Year Dependency Awarded February 11, 2013 2016 Sales growth — February 11, 2013 2016 Cash flow — February 14, 2014 2017 Sales growth — February 14, 2014 2017 Cash flow — February 13, 2015 2018 Sales growth — February 13, 2015 2018 Cash flow — Number of Target Vesting Peer Group Units Grant Date Units Year Companies Awarded February 11, 2013 — February 11, 2013 — February 14, 2014 — February 13, 2015 — Quoted Prices in Active Significant Carrying Markets for Other Significant Loss for Value at Identical Observable Unobservable Six Months Ended June 28, Instruments Inputs Inputs June 28, ($ in thousands) 2015 (Level 1) (Level 2) (Level 3) 2015 Interest rate swap – cash flow hedge $ $ — $ $ — $ Quoted Prices in Active Significant Carrying Markets for Other Significant Loss for Value at Identical Observable Unobservable Year Ended December 31, Instruments Inputs Inputs December 31, ($ in thousands) 2014 (Level 1) (Level 2) (Level 3) 2014 Interest rate swap – cash flow hedge $ $ — $ $ — $ 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. Three Months Ended Six Months Ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Effective tax rate % % % % 30, 2016 for inventory recognized at fair value as a result of acquisition-related adjustments. periods. Early adoption is allowed. The provisions of this determined. In 2015. 2015 Three Months Ended Percent of Percent of (Amounts in thousands, except June 28, June 29, Percent Net Sales – Net Sales – percentages and per share amounts) 2015 2014 Change 2015 2014 Net sales $ $ Cost of goods sold(1) Gross margin Selling, general and administrative expenses Research and development expenses Restructuring and impairment charges Total operating expenses Operating earnings Other (expense) income Earnings before income taxes Income tax expense (benefit) Net earnings $ $ Earnings per share: Diluted net earnings per share $ $ Chinese Renminbi and relating mostly to sales of automotive products. business. June 2016. Three Months Ended June 28, June 29, ($ in thousands) 2015 2014 Interest expense $ $ Interest income Other (expense) income, net Total other (expense) income $ $ Three Months Ended June 28, June 29, 2015 2014 Effective tax rate % % 30, 2015 Six months ended Percent of Percent of (Amounts in thousands, except June 28, June 29, Percent Net Sales – Net Sales – percentages and per share amounts) 2015 2014 Change 2015 2014 Net sales $ $ Cost of goods sold(1) Gross margin Selling and general and administrative expenses Research and development expenses Restructuring and impairment charges Total operating expenses Operating earnings Other expense Earnings from continuing operations before income taxes Income tax expense (benefit) Net earnings $ $ Earnings per share: Diluted net earnings per share $ $ 2015. automotive products. manufacturing costs as the U.S. Dollar appreciated against various local currencies in countries in which we have manufacturing operations. other parts of the business. Six Months Ended June 28, June 29, ($ in thousands) 2015 2014 Interest expense $ $ Interest income Other income, net Total other income (expense) $ $ Six Months Ended June 28, June 29, 2015 2014 Effective tax rate % % a reserve recorded on an uncertain tax position. shareholders' equity, was 26.8% at June 30, 2016, compared to 24.4% at December 31, 2015. receivable. gains on foreign currency hedges totaling $8,225. increased the credit line from $200,000 to $300,000. June 28, December 31, ($ in thousands) 2015 2014 Revolving credit facility due in 2017 $ $ Weighted average interest rate % % Amount available $ $ Total credit facility $ $ Standby letters of credit $ $ Commitment fee percentage per annum 30, 2016. disposed. October 1, 2015. goodwill impairment since that time. Customers Three Months Ended Six Months Ended June 28, June 28, 2015 2014 2015 2014 Customer A % % % % 30, 2016. (c) Total Number (d) (a) of Shares Maximum Number of Total Number of (b) Purchased as Shares That May Yet Be Shares Average Price Part of Plans or Purchased Under the Purchased Paid per Share Program Plans or Programs(1) Balance at March 29, 2015 March 30, 2015 – April 26, 2015 $ April 27, 2015 – May 24, 2015 $ May 25, 2015 – June 28, 2015(3) $ — Total(4) $ (c) Total Number (d) (a) of Shares Maximum Dollar Value Total Number of (b) Purchased as of Shares That May Yet Be Shares Average Price Part of Plans or Purchased Under the Purchased Paid per Share Program Plans or Programs(2) Balance at March 29, 2015 $ — March 30, 2015 – April 26, 2015 — $ — — $ — April 27, 2015 – May 24, 2015 — $ — — $ May 25, 2015 – June 28, 2015(3) $ $ Total(4) $ Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. (31)(b) Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. (32)(a) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. (32)(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Ashish Agrawal Dated: July Dated: July 100,071 102,980 198,382 203,686 66,698 69,157 132,873 139,248 15,224 15,813 30,935 29,454 5,487 5,332 10,686 10,958 2,118 2,733 2,856 3,236 10,544 9,945 21,032 20,790 (653) (582) (1,241) (1,195) 853 688 1,641 1,252 115 (409) (1,569) (2,180) 315 (303) (1,169) (2,123) 10,859 9,642 19,863 18,667 (8,221) 3,281 (5,504) 7,226 19,080 6,361 25,367 11,441 0.58 0.19 0.76 0.34 0.57 0.19 0.75 0.33 33,080 33,741 33,243 33,725 471 467 497 519 33,551 34,208 33,740 34,244 0.040 0.040 0.080 0.080 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Net sales $ 98,693 $ 100,071 $ 195,398 $ 198,382 Cost of goods sold 64,236 66,698 127,472 132,873 Gross Margin 34,457 33,373 67,926 65,509 Selling, general and administrative expenses 15,764 15,224 30,411 30,935 Research and development expenses 5,967 5,487 12,130 10,686 Restructuring and impairment charges 206 2,118 206 2,856 (Gain) loss on sale of assets (11,577 ) 2 (11,351 ) (1 ) Operating earnings 24,097 10,542 36,530 21,033 Other (expense) income: Interest expense (1,009 ) (653 ) (1,829 ) (1,241 ) Interest income 331 853 879 1,641 Other (expense) income (1,240 ) 117 (1,436 ) (1,570 ) Total other (expense) income (1,918 ) 317 (2,386 ) (1,170 ) Earnings before income taxes 22,179 10,859 34,144 19,863 Income tax expense (benefit) 7,692 (8,221 ) 11,794 (5,504 ) Net earnings $ 14,487 $ 19,080 $ 22,350 $ 25,367 Earnings per share: Basic $ 0.44 $ 0.58 $ 0.68 $ 0.76 Diluted $ 0.44 $ 0.57 $ 0.67 $ 0.75 Basic weighted – average common shares outstanding: 32,759 33,080 32,695 33,243 Effect of dilutive securities 466 471 485 497 Diluted weighted – average common shares outstanding 33,225 33,551 33,180 33,740 Cash dividends declared per share $ 0.04 $ 0.04 $ 0.08 $ 0.08 19,080 6,361 25,367 11,441 69 (147) (17) (107) 705 887 1,962 1,801 1,491 617 388 821 2,265 1,357 2,333 2,515 21,345 7,718 27,700 13,956 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Net earnings $ 14,487 $ 19,080 $ 22,350 $ 25,367 Other comprehensive income (loss): Changes in fair market value of hedges, net of tax (67 ) 69 227 (17 ) Changes in unrealized pension cost, net of tax 947 705 1,855 1,962 Cumulative translation adjustment, net of tax (317 ) 1,491 (726 ) 388 Other comprehensive income $ 563 $ 2,265 $ 1,356 $ 2,333 Comprehensive income $ 15,050 $ 21,345 $ 23,706 $ 27,700 146,791 134,508 63,046 56,894 30,424 27,887 21,400 21,112 261,661 240,401 70,166 71,414 36,563 32,099 32,047 32,047 690 690 33,945 35,902 53,088 43,120 1,110 1,253 157,443 145,111 489,270 456,926 45,724 43,343 10,364 11,283 27,395 25,356 83,483 79,982 88,700 75,000 2,908 3,049 8,647 9,106 300,869 299,892 40,237 39,153 402,863 380,145 (101,900) (104,233) 642,069 614,957 (336,537) (325,168) 305,532 289,789 489,270 456,926 (Unaudited) June 30, December 31, 2016 2015 ASSETS Current Assets Cash and cash equivalents $ 119,912 $ 156,928 Accounts receivable, net 62,125 54,563 Inventories, net 25,978 24,600 Other current assets 12,457 9,863 Total current assets 220,472 245,954 Property, plant and equipment, net 76,973 69,872 Other Assets Prepaid pension asset 37,712 33,779 Goodwill 61,744 33,865 Other intangible assets, net 67,567 34,758 Deferred income taxes 54,212 63,809 Other 1,154 1,336 Total other assets 222,389 167,547 Total Assets $ 519,834 $ 483,373 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable $ 41,679 $ 40,299 Accrued payroll and benefits 8,501 7,147 Accrued liabilities 46,915 47,174 Total current liabilities 97,095 94,620 Long-term debt 110,800 90,700 Post retirement obligations 7,105 7,230 Other long-term obligations 2,200 9,169 Total Liabilities 217,200 201,719 Shareholders’ Equity Common stock 302,146 300,909 Additional contributed capital 39,824 41,166 Retained earnings 401,569 381,840 Accumulated other comprehensive loss (97,649 ) (99,005 ) Total shareholders’ equity before treasury stock 645,890 624,910 Treasury stock (343,256 ) (343,256 ) Total shareholders’ equity 302,634 281,654 Total Liabilities and Shareholders’ Equity $ 519,834 $ 483,373 25,367 11,441 8,093 8,401 3,297 2,906 2,362 1,179 2,856 3,236 (4,422) (4,208) (1) (1,855) (6,628) 1,346 (2,914) 3,632 1,556 (3,145) (3,292) (10,864) 1,210 (357) (11,243) 2,714 (747) (4,370) (9,873) (1,385) 15,494 10,056 (3,905) (5,991) 3 1,910 (3,902) (4,081) (562,300) (482,400) 576,000 483,600 (778) 778 (11,369) (3,732) (2,668) (2,693) 64 1,328 147 222 (126) (3,675) 817 562 12,283 2,862 134,508 124,368 146,791 127,230 1,046 834 4,248 4,737 Six Months Ended June 30, June 28, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 22,350 $ 25,367 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 8,925 8,093 Pension and other post-retirement plan (income) expense (794 ) 3,297 Equity-based compensation 967 2,362 Restructuring charges 206 2,856 Prepaid pension assets — (4,422 ) Deferred income taxes 2,877 — (Gain) loss on sales of fixed assets (11,351 ) (1 ) (Gain) loss on foreign currency hedges (3 ) — Proceeds from settlement of foreign currency hedges 46 — Changes in assets and liabilities: Accounts receivable (5,805 ) (6,628 ) Inventories 842 (2,914 ) Other assets (2,115 ) (409 ) Accounts payable 169 1,556 Accrued payroll and benefits 876 (704 ) Accrued expenses (2,594 ) (2,588 ) Income taxes payable 800 1,210 Other liabilities (1,466 ) (11,581 ) Pension and other post-retirement plans (175 ) — Net cash provided by operating activities 13,755 15,494 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (7,483 ) (3,905 ) Proceeds from sale of assets 12,237 3 Payment for acquisition, net of cash acquired (73,063 ) — Net cash used in investing activities (68,309 ) (3,902 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt (1,462,100 ) (562,300 ) Proceeds from borrowings of long-term debt 1,482,200 576,000 Purchase of treasury stock — (11,369 ) Dividends paid (2,612 ) (2,668 ) Windfall tax benefits from equity awards 696 147 Proceeds from exercise of stock options — 64 Net cash provided by (used in) financing activities 18,184 (126 ) Effect of exchange rate changes on cash and cash equivalents (646 ) 817 Net (decrease) increase in cash and cash equivalents (37,016 ) 12,283 Cash and cash equivalents at beginning of period 156,928 134,508 Cash and cash equivalents at end of period $ 119,912 $ 146,791 Supplemental cash flow information: Cash paid for interest $ 1,547 $ 1,046 Cash paid for income taxes, net $ 8,703 $ 4,248 28, 20152014. At December 31, 2015 Consolidated Balance Sheet Line Item As previously reported Reclassification adjustment As currently reported Other current assets $ 15,888 $ (6,025 ) $ 9,863 Deferred income taxes $ 58,544 $ 5,265 $ 63,809 Accrued liabilities $ (53,905 ) $ 6,731 $ (47,174 ) Post-retirement obligations $ (2,703 ) $ (4,527 ) $ (7,230 ) Other long-term obligations $ (7,725 ) $ (1,444 ) $ (9,169 ) 63,174 56,994 (128) (100) 63,046 56,894 As of June 30, December 31, 2016 2015 Accounts receivable, gross $ 62,297 $ 54,696 Less: Allowance for doubtful accounts (172 ) (133 ) Accounts receivable, net $ 62,125 $ 54,563 12,922 11,728 8,000 7,297 16,297 15,562 (6,795) (6,700) 30,424 27,887 As of June 30, December 31, 2016 2015 Finished goods $ 5,881 $ 6,972 Work-in-process 8,501 6,828 Raw materials 17,856 16,991 Less: Inventory reserves (6,260 ) (6,191 ) Inventories, net $ 25,978 $ 24,600 As of June 30, December 31, 2016 2015 3,044 3,044 $ 2,330 $ 2,401 68,371 67,269 63,053 65,731 188,507 185,999 203,637 191,212 (189,756) (184,898) (192,047 ) (189,472 ) 70,166 71,414 $ 76,973 $ 69,872 (530) (454) (1,059) (1,080) Net Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Net pension income $ (402 ) $ (530 ) $ (794 ) $ (1,059 ) breakdown for our domestic and foreign plans include the following components:following: Foreign Pension Plans Three Months Ended Three Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 42 48 16 21 $ 22 $ 42 $ 13 $ 16 2,815 3,053 124 155 2,756 2,815 11 124 (5,068) (5,208) (134) (170) (4,744 ) (5,068 ) 7 (134 ) 1,585 1,416 90 59 1,498 1,585 35 90 172 (626) (519) 96 65 $ (468 ) $ (626 ) $ 66 $ 96 86 96 33 42 5,629 6,111 247 305 (10,136) (10,416) (267) (337) 3,169 2,829 180 118 172 (1,252) (1,208) 193 128 (1)Expected return on plan assets is net of expected investment expenses and certain administrative expenses. Foreign Pension Plans Six Months Ended Six Months Ended June 30, 2016 June 28, 2015 June 30, 2016 June 28, 2015 Service cost $ 44 $ 86 $ 25 $ 33 Interest cost 5,512 5,629 22 247 (9,488 ) (10,136 ) 14 (267 ) Amortization of loss 2,996 3,169 69 180 Other cost due to retirement 12 — — — (Income) expense, net $ (924 ) $ (1,252 ) $ 130 $ 193 PostretirementPost-retirement Benefit Planpostretirementpost-retirement expense for our postretirementpost-retirement plan includes the following components:1 1 2 2 51 58 102 115 (25) (40) (50) (79) 27 19 54 38 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Other post-retirement benefit plan Service cost $ 1 $ 1 $ 2 $ 2 Interest cost 52 51 104 102 Amortization of gain (37 ) (25 ) (75 ) (50 ) Post-retirement expense $ 16 $ 27 $ 31 $ 54
Carrying
Amount
Amortization51,804 (25,752) 26,052 10,319 (10,319) 12,270 (4,377) 7,893 74,393 (40,448) 33,945 984 1,957 As of
Carrying
Amount
Amortization June 30, 2016 Gross
Carrying
Amount Accumulated
Amortization Net Amount 51,804 (24,415) 27,389 $ 63,386 $ (28,643 ) $ 34,743 10,319 (10,319) 10,319 (10,319 ) — 12,270 (3,757) 8,513 Technology and other intangibles 36,715 (6,091 ) 30,624 In process research and development 2,200 — 2,200 74,393 (38,491) 35,902 $ 112,620 $ (45,053 ) $ 67,567 1,045 Amortization expense for the three months ended June 30, 2016 $ 1,522 2,079 Amortization expense for the six months ended June 30, 2016 $ 2,617 As of December 31, 2015 Gross
Carrying
Amount Accumulated
Amortization Net Amount Amortized intangible assets: Customer lists/relationships $ 51,804 $ (27,101 ) $ 24,703 Patents 10,319 (10,319 ) — Technology and other intangibles 12,871 (5,016 ) 7,855 In process research and development 2,200 — 2,200 Other intangible assets, net $ 77,194 $ (42,436 ) $ 34,758 Amortization expense for the three months ended June 28, 2015 $ 984 Amortization expense for the six months ended June 28, 2015 $ 1,957
expense1,992 Amortization
expense3,647 $ 2,933 3,569 5,693 3,484 5,573 3,475 5,564 2020 5,564 17,778 42,240 33,945 $ 67,567 $2,335,000 foras follows: Three Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ 217 Restructuring and impairment charges 206 2,118 Total restructuring, impairment, and restructuring-related charges $ 206 $ 2,335 Six Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ 292 Restructuring and impairment charges 206 2,856 Total restructuring, impairment, and restructuring-related charges $ 206 $ 3,148 three month periodElkhart facility by mid-2018 and $3,148,000 fortransitioning it into a research and development center supporting CTS' global operations ("June 2016 Plan"). Additional organizational changes will also occur in various other locations. The cost of the six month period endedplan is preliminarily expected to range between $16,000 and $18,000, including the severance charges below, however this range may change significantly as we are still in the early stages of estimating the cost of the Plan. The total restructuring liability related to the June 28, 2015. 2016 Plan was $196 at June 30, 2016. Additional liabilities related to the June 2016 Plan will be accrued following finalization of cost estimates and notification of our plans to the affected employees following negotiations with employee labor representatives. impairment and restructuring related charges were $3,072,000 for the three month period ended and $4,146,000 for the six month period ended June 29, 2014.Restructuring related charges were $217,000 for the three month period and $292,000 for the six month period ended June 28, 2015. Restructuring related charges were $338,000 for the three month period and $910,000 for the six month period ended June 29, 2014. Restructuring and impairment charges under the June 2016 Plan were $2,118,000 for the three month period and $2,856,000 for the six month period ended June 28, 2015. Restructuring and impairment charges were $2,733,000 for the three month period and $3,236,000 for the six month period ended June 29, 2014.Duringas follows:Three Months Ended June 30, 2016 June 28, 2015 Restructuring and impairment charges 206 — Six Months Ended June 30, 2016 June 28, 2015 Restructuring and impairment charges 206 — amendmentrevision added an additional $4,250,000$4,250 in planned costs. Additional administrative and legal costs are estimatedwere expected to account for $1,300,000$1,300 of the additional restructuring and impairment charges due to the extension of the timing of the plant shutdown.charges. The remaining $2,950,000$2,950 in restructuring related charges are for additional costs related to equipment relocation, training, travel and shipping costs to facilitate an effective transition. The above actions are expected to be substantially complete in 2015.will resultwhich were completed during 2015, resulted in the eliminationreduction of approximately 120 positions. These actions are expected to be completed in 2015. 28, 2015:30, 2016:850 1,800 135 1,400 82 4,050 217 4,200 3,888 1,700 1,459 5,900 5,347 9,950 5,564 Under Actual costs Planned incurred through April 2014 Plan Costs June 30, 2016 Inventory write-down $ 850 $ — Equipment relocation 1,800 444 Other charges 1,400 113 Restructuring-related charges, included in cost of goods sold $ 4,050 $ 557 Workforce reduction $ 4,200 $ 4,423 Asset impairment charge — — Other charges, including pension termination costs 1,700 3,413 Restructuring and impairment charges $ 5,900 $ 7,836 Total restructuring, impairment and restructuring related charges $ 9,950 $ 8,393 Three Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ 217 Restructuring and impairment charges — 1,516 Total restructuring, impairment, and restructuring related charges $ — $ 1,733 Six Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ 217 Restructuring and impairment charges — 1,877 Total restructuring, impairment, and restructuring-related charges $ — $ 2,094 and impairment charges were $1,516,000 inliability related to the three month period and $1,877,000 in the six month period endedApril 2014 Plan was $611 at June 28, 2015. Restructuring and impairment charges were $2,405,000 for the three and six month periods ended June 29, 2014. Restructuring related charges were $217,000 for the three and six month periods ended June 28, 2015. Restructuring related charges were $0 for the three and six month periods ended June 29, 2014.During30, 2016.includesincluded the consolidation of operations from the U.K. manufacturing facility into the Czech Republic facility, the Carol Stream, Illinois manufacturing facility into the Juarez, Mexico facility and to discontinuediscontinuing manufacturing at itsthe Singapore facility. Certain Corporatecorporate functions were consolidated or eliminated as a result of the June 2013 Plan.will resultwere completed in 2015 and resulted in the eliminationreduction of approximately 350 positions. The above actions are expected to be completed in 2015.amendmentrevision added an additional $4,000,000$4,000 in planned costs. Future settlementSettlement of the U.K. pension plan is estimatedwas expected to account for $2,000,000$2,000 of the added cost. The remaining $2,000,000$2,000 in restructuring and impairment charges arewere for severance costs and will resultresulted in the eliminationreduction of approximately 130 additional positions. The positions eliminated will be spread globally throughout CTS businesses. The above actions are expected to be substantially completewere completed in 2015.realignment, as well asJune 2013 Plan and a summary of the actual costs incurred through June 28, 2015:30, 2016:
incurred through800 1,143 900 1,792 100 652 1,800 3,587 10,150 8,793 3,000 4,258 7,650 1,740 20,800 14,791 22,600 18,378 Actual Planned incurred through June 2013 Plan Costs June 30, 2016 Inventory write-down $ 800 $ 1,143 Equipment relocation 900 1,792 Other charges 100 702 Restructuring-related charges, included in cost of goods sold $ 1,800 $ 3,637 Workforce reduction $ 10,150 $ 9,615 Asset impairment charge 3,000 4,139 Other charges, including pension termination costs 7,650 10,205 Restructuring and impairment charges $ 20,800 $ 23,959 Total restructuring and restructuring-related charges $ 22,600 $ 27,596 $602,000as follows: Three Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ — Restructuring and impairment charges — 602 Total restructuring, impairment, and restructuring-related charges $ — $ 602 Six Months Ended June 30, 2016 June 28, 2015 Restructuring-related charges $ — $ 75 Restructuring and impairment charges — 979 Total restructuring, impairment, and restructuring-related charges $ — $ 1,054 three month period June 28, 2015 and were $1,054,000 for the six month period ended2013 Plan as of June 28, 2015. Total restructuring, impairment and restructuring related charges incurred were $667,000 for the three month period June 29, 2014 and were $1,741,000 for the six month period ended June 28, 2014. For the three month period June 28, 2015, the restructuring related charges were $0 and the restructuring and impairment charges were $602,000. For the three month period June 29, 2014, the restructuring related charges were $338,000 and the restructuring and impairment charges were $329,000. For the six month period June 28, 2015, the restructuring related charges were $75,000 and the restructuring and impairment charges were $979,000. For the six month period ended June 29, 2014, the restructuring related charges were $910,000 and the restructuring and impairment charges were $832,000.reserveliability activity for all plans for the period ended June 28, 2015:30, 2016: ($ in thousands) June 2013 Plan and April 2014 PlanRestructuring liability at January 1, 2015$Combined Plans Restructuring liability at January 1, 2016 $ 826 Restructuring and restructuring-related charges, excluding asset impairments and write-offs 206 Cost paid (265 ) $ 40 Restructuring liability at June 30, 2016 $ 807 3,904Restructuring and restructuring-related charges, excluding asset impairments and write-offs3,148Cost paid(2,849)Restructuring liability at June 28, 2015$4,2034,020 5,216 4,560 3,346 3,032 2,547 1,316 1,336 4,980 3,918 9,487 8,993 27,395 25,356 As of June 30, December 31, 2016 2015 Accrued product related costs $ 4,873 $ 5,245 Accrued income taxes 9,655 8,845 Accrued property and other taxes 1,750 1,838 Accrued outside commissions 1,294 97 Accrued professional fees 1,465 704 Accrued building improvement costs 1,709 1,768 Dividends payable 1,310 1,302 Remediation reserves 19,575 20,603 Other accrued liabilities 5,284 6,772 Total accrued liabilities $ 46,915 $ 47,174 CTS’CTS' current and past products create hazardous waste by-products as currently defined by federal and state laws and regulations. CTS has been notified by the U.S. Environmental Protection Agency, (“EPA”), state environmental agencies, and in some cases, generator groups, that it is or may be a potentially responsible party regarding hazardous substances at several sites either presently or historically owned, not ownedleased, or operated by CTS. Some sites are Superfund sites such as in Asheville, North Carolina and Mountain View, California. Estimating our degree of responsibilityCTS reserves for probable remediation is inherently difficult.activities and for claims and proceedings against CTS recognizes and accrues for an estimated remediation liability when it determines that such liability is probable and estimable. Aswith respect to other environmental matters. CTS records reserves on a result of this practice, to provide for certain groundwater remedial work expected to commence in 2016 relating to the Asheville site, CTS increased its accrual for remediation and monitoring reserves, as set forth in Note 8. This increased amount reflects the most probable costs to remediate identified environmental conditions at the site for which costs can be reasonably estimated. CTS understands that some additional work may be needed to investigate and/or remediate groundwater that has migrated from the former plant property at Asheville, but the scope of the work has yet to be determined with the EPA. As assessments and cleanups proceed, the reserve will be adjusted based on progress made in determining the extent of remedial actions and related costs.undiscounted basis. In the opinion of management, based upon presently available information relating to all such matters, adequate provision for probable and estimable costs hashave been made.manufactures accelerator pedals for a numbercannot provide assurance that its ultimate environmental investigation and clean-up costs and liabilities will not materially exceed the amount of automobile manufacturers, including subsidiaries of Toyota Motor Corporation (“Toyota”). In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The recall expanded to include vehicles in Europeits current reserve. Our reserve and Asia. The pedal recall and associated events have led to CTS being named as a co-defendant with Toyota in certain litigationdisclosures will be adjusted accordingly if additional information becomes available in the United States and Canada. CTS is not aware of any legal actions filed in Asia or Europe against CTS at this time. In February 2010, CTS entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold CTS harmless from, andfuture.parties will cooperate in the defense of, third-party civilenvironmental claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. The limited exceptions to indemnification restrict CTS’ share of any liability to amounts collectable from its insurers.Certaindescribed above, certain other claims are pending against CTS with respect to matters arising out of the ordinary conduct of CTS’ business. InAlthough the opinionultimate outcome of any potential litigation resulting from these claims cannot be predicted with certainty, and some may be disposed of unfavorably to CTS, management based upon past experience and presently available information, eitherbelieves that adequate provision for anticipated costs hashave been reservedestablished based upon all presently available information. Except as noted herein, we do not believe we have any pending loss contingencies that are probable or the ultimate anticipated costs will not materially affect CTS’reasonably possible of having a material impact on our consolidated financial position, results of operations, or cash flows.88,700 75,000 1.4 1.5 108,985 122,535 200,000 200,000 2,315 2,465 0.25 0.25 As of June 30, December 31, 2016 2015 Revolving credit facility due in 2020 $ 110,800 $ 90,700 Weighted average interest rate 1.9 % 1.5 % Amount available $ 187,035 $ 106,985 Total credit facility $ 300,000 $ 200,000 Standby letters of credit $ 2,165 $ 2,315 Commitment fee percentage per annum 0.30 % 0.25 % facilitycommitments under its existing credit agreement, which increased the credit line from $200,000 to $300,000. revolving credit facility.Revolving Credit Facility. CTS was in compliance with all debt covenants at June 28, 2015.30, 2016. The revolving credit facilityRevolving Credit Facility requires that CTS to deliver quarterly financial statements, annual financial statements, auditors certifications and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the revolving credit facilityRevolving Credit Facility contains restrictions limiting CTS' ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with CTS' subsidiaries and affiliates; and make stock repurchases and dividend payments. Interest rates onrevolving credit facilityRevolving Credit Facility fluctuate based upon the London Interbank Offered Rate and the Company’s quarterly total leverage ratio. CTS pays a commitment fee on the undrawn portion of the revolving credit facility. The commitment fee varies based on the quarterly leverage ratio. $50,000$32 and $50 for the three months ended June 30, 2016 and June 28, 2015, respectively, and approximately $100,000$70 and $100 for the first six months ended June 30, 2016 and June 28, 2015, respectively. recognized as interest expense.$50,000,000$50,000 of long-term debt for the periods January 2013 to January 2017. In the third quarter of 2012, CTS entered into four separateadditional interest rate swap agreements to fix interest rates on $25,000,000$25,000 of long-term debt for the periods January 2013 to January 2017. The difference to be paid or received under the terms of the swap agreements will be recognized as an adjustment to interest expense when settled.Otherother comprehensive income.income (loss). The estimated net amount of the existing gains or losses that are reported in accumulated other comprehensive income (loss) that is expected to be reclassified into earnings within the next twelve months is approximately $480,000. Interest rate swaps activity recorded$480. Other comprehensive earnings before tax includes the following:Condensed Consolidated Balance Sheets as of June 30, 2016, are shown in the following table:(82) (360) (409) (414) 192 122 382 240 Interest rate swaps included As of June 30, December 31, 2016 2015 Foreign currency hedges reported in Other current assets $ 34 $ — Interest rate swaps reported in Accrued liabilities $ (480 ) $ (768 ) balance sheets are comprisedCondensed Consolidated Statements of the following:Earnings is as follows:788 640 259 380 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Foreign Exchange Contracts: Loss recognized in Net Sales $ (84 ) $ — $ (91 ) $ — Gain recognized in Cost of Goods Sold 88 — 88 — Gain recognized Selling, General and Administrative expense 6 — 10 — Loss recognized in Other (expenses) income — — (1 ) — Interest Rate Swaps: Interest Expense $ 161 $ 192 $ 313 $ 382 Total $ 171 $ 192 $ 319 $ 382 1112 – Accumulated Other Comprehensive (Loss) IncomeAccumulatedaccumulated other comprehensive (loss) income (“AOCI”) in the Condensed Consolidated Balance Sheets, including:·Unrealized gains (losses) on hedges relate to interest rate swaps to convert the line of credit’s variable rate of interest into a fixed rate. These hedges are designated as cash flow hedges, and CTS has deferred income statement recognition of gains and losses until the hedged transaction occurs. Amounts reclassified to income from AOCI for hedges are included in interest expense. Further information related to CTS’ interest rate swaps is included in NOTE 10 – Debt and NOTE 14 – Fair Value Measurement.·Unrealized gains (losses) on pension obligations are deferred from income statement recognition until the gains or losses are realized. Amounts reclassified to income from AOCI are included in net periodic pension expense. Further information related to CTS’ pension obligations is included in NOTE 5 – Retirement Plans.·Cumulative translation adjustment relates to our non-U.S. subsidiary companies that have designated a functional currency other than the U.S. dollar. CTS is required to translate the subsidiary functional currency financial statements to 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. Changes in exchange rates between the functional currency and the currency in which a transaction is denominated is a foreign exchange transaction gain or loss. Transaction loss for the six month period ended June 28, 2015 was $1,563,000 which is included in Other in the Condensed Consolidated Statement of Earnings.loss(loss) income for the three months ended June 30, 2016, are as follows: Gain (Loss) As of Gain (Loss) reclassified As of March 31, Recognized from AOCI June 30, 2016 in OCI to income 2016 Changes in fair market value of hedges: Gross $ (295 ) $ (337 ) $ 229 $ (403 ) Income tax expense (benefit) 110 127 (86 ) 151 Net (185 ) (210 ) 143 (252 ) Changes in unrealized pension cost: Gross (160,268 ) — 1,505 (158,763 ) Income tax expense (benefit) 63,818 — (558 ) 63,260 Net (96,450 ) — 947 (95,503 ) Cumulative translation adjustment: Gross (1,685 ) (310 ) — (1,995 ) Income tax expense (benefit) 108 (7 ) — 101 Net (1,577 ) (317 ) — (1,894 ) Total accumulated other comprehensive (loss) income $ (98,212 ) $ (527 ) $ 1,090 $ (97,649 ) (1,157) (82) 192 (1,047) (435) (31) 72 (394) (722) (51) 120 (653) (167,361) 1,199 (166,162) (64,451) 494 (63,957) (102,910) 705 (102,205) (491) 1,064 573 42 (427) (385) (533) 1,491 958 (104,165) 2,145 120 (101,900) Gain (Loss) As of Gain (Loss) reclassified As of March 29, Recognized from AOCI June 28, 2015 in OCI to income 2015 Changes in fair market value of hedges: Gross $ (1,157 ) $ (82 ) $ 192 $ (1,047 ) Income tax expense (benefit) 435 31 (72 ) 394 Net (722 ) (51 ) 120 (653 ) Changes in unrealized pension cost: Gross (167,361 ) 1,199 — (166,162 ) Income tax expense (benefit) 64,451 (494 ) — 63,957 Net (102,910 ) 705 — (102,205 ) Cumulative translation adjustment: Gross (491 ) 1,064 — 573 Income tax expense (benefit) (42 ) 427 — 385 Net (533 ) 1,491 — 958 Total accumulated other comprehensive (loss) income $ (104,165 ) $ 2,145 $ 120 $ (101,900 ) loss(loss) income for the threesix months ended June 29, 201430, 2016, are as follows:(934) (358) 122 (1,170) (378) (136) 47 (467) (556) (222) 75 (703) (136,683) 1,251 172 (135,260) (54,492) 470 66 (53,956) (82,191) 781 106 (81,304) 1,082 388 1,470 (926) (229) (1,155) 2,008 617 2,625 (80,739) 1,176 181 (79,382) Gain (Loss) As of Gain (Loss) reclassified As of December 31, Recognized from AOCI June 30, 2015 in OCI to income 2016 Changes in fair market value of hedges: Gross $ (768 ) $ (95 ) $ 460 $ (403 ) Income tax expense (benefit) 289 36 (174 ) 151 Net (479 ) (59 ) 286 (252 ) Changes in unrealized pension cost: Gross (161,719 ) — 2,956 (158,763 ) Income tax expense (benefit) 64,361 — (1,101 ) 63,260 Net (97,358 ) — 1,855 (95,503 ) Cumulative translation adjustment: Gross (1,279 ) (716 ) — (1,995 ) Income tax expense (benefit) 111 (10 ) — 101 Net (1,168 ) (726 ) — (1,894 ) Total accumulated other comprehensive (loss) income $ (99,005 ) $ (785 ) $ 2,141 $ (97,649 ) loss(loss) income for the six months ended June 28, 2015, are as follows:(1,020) (409) 382 (1,047) (384) (154) 144 (394) (636) (255) 238 (653) (169,291) 3,129 (166,162) (65,124) 1,167 (63,957) (104,167) 1,962 (102,205) 245 328 573 (325) (60) (385) 570 388 958 (104,233) 2,095 238 (101,900) The components Gain (Loss) As of Gain (Loss) reclassified As of December 31, Recognized from AOCI June 28, 2014 in OCI to income 2015 Changes in fair market value of hedges: Gross $ (1,020 ) $ (409 ) $ 382 $ (1,047 ) Income tax expense (benefit) 384 154 (144 ) 394 Net (636 ) (255 ) 238 (653 ) Changes in unrealized pension cost: Gross (169,291 ) 3,129 — (166,162 ) Income tax expense (benefit) 65,124 (1,167 ) — 63,957 Net (104,167 ) 1,962 — (102,205 ) Cumulative translation adjustment: Gross 245 328 — 573 Income tax expense (benefit) 325 60 — 385 Net $ 570 $ 388 $ — $ 958 Total accumulated other comprehensive (loss) income $ (104,233 ) $ 2,095 $ 238 $ (101,900 ) (998) (412) 240 (1,170) (402) (157) 92 (467) (596) (255) 148 (703) (138,133) 2,701 172 (135,260) (55,028) 1,006 66 (53,956) (83,105) 1,695 106 (81,304) 949 521 1,470 (855) (300) (1,155) 1,804 821 2,625 (81,897) 2,261 254 (79,382) 1213 – Shareholders’ Equity25,000,000 25,000,000 75,000,000 75,000,000 56,240,253 56,101,700 32,903,731 33,392,060 23,336,522 22,709,640 As of June 30, December 31, 2016 2015 Preferred Stock Par value per share No par value No par value Shares authorized 25,000,000 25,000,000 Shares outstanding — — Common Stock Par value per share No par value No par value Shares authorized 75,000,000 75,000,000 Shares issued 56,452,983 56,242,499 Shares outstanding 32,758,961 32,548,477 Treasury stock Shares held 23,694,022 23,694,022 uses the cost method to account for its common stock purchases. During the six month period ended June 28, 2015, CTShad purchased 626,882164,852 shares of common stock for an aggregate of $11,369,132$2,893 under a previously board-authorized share repurchase plan. ForNo common stock repurchases were made during the six month period endedmonths ending June 29, 2014, CTS purchased 211,270 shares of common stock for an aggregate of $3,732,000.30, 2016. Approximately 9,517,922 shares are$17,554 is available for future issuances.roll forwardroll-forward of common shares outstanding is as follows:33,392,060 33,558,864 (626,882) (211,270) 5,200 101,350 133,353 169,937 32,903,731 33,618,881 Six Months Ended June 30, June 28, 2016 2015 Balance at the beginning of the year 32,548,477 33,392,060 Repurchases — (626,882 ) Shares issued upon exercise of stock options — 5,200 Restricted share issuances 210,484 133,353 Balance at the end of the period 32,758,961 32,903,731 1314 - Equity-Based Compensation28, 2015,30, 2016, CTS had fivefour equity-based compensation plans: the 2001 Stock Option Plan (“2001 Plan”), the Nonemployee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), and the 2014 Performance & Incentive Plan (“2014 Plan”). Future grants can only be made under the 2014 Plan. 2001 Plan and 2004 Plan, provides for grants of incentive stock options or nonqualified stock options to officers, key employees, and nonemployeenon-employee members of CTS’ Board of Directors. In addition, the 2014 Plan, the 2009 Plan and the 2004 Plan allow for grants of stock appreciation rights, restricted stock, RSUs,restricted stock units ("RSUs"), performance shares, performance units, and other stock awards.Selling,selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings related to equity-based compensation plans:400 210 949 683 251 99 771 273 191 91 642 223 842 400 2,362 1,179 317 153 888 450 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Service-Based RSUs $ 436 $ 400 $ 948 $ 949 Performance-Based RSUs 130 251 (25 ) 771 Market-Based RSUs 119 191 44 642 Total $ 685 $ 842 $ 967 $ 2,362 Income tax benefit $ 257 $ 317 $ 363 $ 888 1,886 1.2 1,656 1.4 988 1.3 4,530 Unrecognized �� compensation Weighted- expense at average June 30, 2016 period Service-Based RSUs $ 2,084 1.4 years Performance-Based RSUs 698 1.5 years Market-Based RSUs 638 1.4 years Total $ 3,420 1.4 years statusmaximum number of awards available to be granted under these plans as of June 28, 2015:30, 2016:1,500,000 3,400,000 6,500,000 2,000,000 78,947 248,389 129,025 1,352,075 1,617,062 106,423 2014 Plan 2009 Plan 2004 Plan Directors' Plan Awards originally available 1,500,000 3,400,000 6,500,000 N/A Stock options outstanding — — — — Options exercisable — — — — Performance-based options outstanding 325,000 — — — Service-based RSUs outstanding 257,371 170,442 78,947 25,985 Performance and market-based RSUs outstanding at 200% of target 351,300 86,120 — — RSUs vested and released 48,339 — — — Awards available for grant 517,990 256,562 78,947 25,985 grant. The stock options generallygrant, vest over four years, and have a 10-year contractual life. The awards generally contain provisions to either accelerate vesting or allow vesting to continue on schedule upon retirement if certain service and age requirements are met. The awards also provide for accelerated vesting if there is a change in control event.estimated the fair value of the stock option on the grant date using the Black-Scholes option-pricing model and assumptions for expected price volatility, option term, risk-free interest rate, and dividend yield. Expected price volatilities were based on historical volatilities of CTS’ common stock. The expected option term is derived from historical data on exercise behavior. The dividend yield was based on historical dividend payments. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. A summary of the status ofhas no stock options exercisable or outstanding as of June 28, 2015, and changes during30, 2016, other than the period then ended, is presented below:5,200 12.35 (5,200) 12.35 quarterquarters of 2015 and 2016, the Compensation Committee of the Board of Directors of the Company (the “Committee”) granted a total of 430,000325,000 performance-based stock option awards (“Performance-Based Option Awards”) for certain CTS employees under the 2014 Plan. The Performance-Based Option Awards which have a grant date of May 26, 2015 and a grant date fair valuean exercise price of $18.37, are subject to the terms of the 2014 Plan. The Performance-Based Option Awards generally have a term of five years, and generally will become exercisable (provided the optionee remains employed by CTS or an affiliate) upon CTS’ attainment of at least $600,000,000$600,000 in revenues during any of CTS’ four-fiscal-quarter trailing periods (as determined by the Committee) during the term. CTS has not recognized any expense on these Performance-Based Option Awards for the six months ended June 28, 201530, 2016, since the revenue target is not deemed likely to be attained based upon the Company’s earnings history and forecast, at this time.granted.the grant date. Upon vesting, thegrant, each non-employee directors electdirector elects to either receive the stock associated with the RSU immediately upon vesting, or defer receipt of the stock until theirhis or her retirement from the Board of Directors. The fair value of the RSUs is equivalent to the trading value of CTS’ common stock on the grant date.517,965 12.06 114,025 16.93 (163,633) 12.34 (11,996) 16.78 456,361 13.05 Performance-Based Six Months Ended June 30, 2016 Units Weighted
Average
Grant Date
Fair ValueOutstanding at January 1, 2016 471,196 $ 13.27 Granted 164,922 13.97 Vested and released (97,298 ) 14.39 Forfeited (32,060 ) 17.05 Outstanding at June 30, 2016 506,760 $ 13.13 Releasable at June 30, 2016 277,749 $ 11.33 Six Months Ended June 30, 2016 Units Weighted
Average
Grant Date
Fair ValueOutstanding at January 1, 2016 33,974 $ 11.75 Granted — — Vested and released (7,989 ) 11.75 Forfeited — — Outstanding at June 30, 2016 25,985 $ 11.75 Releasable at June 30, 2016 25,985 $ 11.75 forto certain executives. Vesting may occur in the range fromamount of zero percent to 200% of the target amount.grant target. Vesting is subject to certification of the fiscalfinancial results offor the last year prior toin the target yearperformance period by CTS’ independent auditors. VestingThe number of awards vesting is dependent upon CTS’ achievement of either sales growth targets or cash flow targets as noteddefined in the table below.Performance-Based RSUs include the following components:47,164 40,425 22,538 19,319 30,993 26,565 Market-Based Restricted Stock Unitsforto certain executives and key employees. Vesting may occur in the range fromamount of zero percent to 200% of the target amount.grant target. Vesting is subject to certification of the fiscalfinancial results for the last year of the year prior to the target yearrange by CTS’ independent auditors. The number of awards vesting rate will beis determined using a matrix based on a percentile ranking of CTSCTS' total stockholder return with a peer group total shareholder return over athe three-year period comprising the performance period. Vesting is tied exclusively to CTSCTS' total stockholder return relative to peer group companies’ total stockholder return rates. Market-Based RSUs includerates during the performance period. components:table summarizes the performance and market-based RSU activity as of and for the six months ended June 30, 2016:40,425 2016 20 48,750 2016 20 22,538 2017 15 30,993 2018 23 Units Weighted
Average
Grant Date
Fair ValueOutstanding at January 1, 2016, at target 249,560 14.59 Granted, at target 108,650 13.56 Attained by performance 97,017 10.48 Vested and released (234,517 ) 10.52 Forfeited, at target (9,000 ) 17.14 Outstanding at June 30, 2016, at target 211,710 16.58 Maximum potential units outstanding at June 30, 2016 437,420 16.63 1415 — Fair Value Measurementstheour line of credit’s variable rate of interest into a fixed rate. The interest rate swapsand foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies. These derivative financial instruments are measured at fair value on a recurring basis. The table below summarizes CTS’ financial liabilityassets (liabilities) that waswere measured at fair value as of three month periodat June 28, 2015 and the loss recorded during the six month period ended June 28, 2015:30, 2016:1,047 1,047 27 Quoted Prices in Active Significant Carrying Markets for Other Significant Value at Identical Observable Unobservable June 30, Instruments Inputs Inputs 2016 (Level 1) (Level 2) (Level 3) Interest rate swaps $ (480 ) $ — $ (480 ) $ — Foreign currency hedges $ 34 $ — $ 34 $ — 2014 and the loss recorded during the year ended December 31, 2014:2015:1,020 1,020 488 Quoted Prices in Active Significant Carrying Markets for Other Significant Value at Identical Observable Unobservable December 31, Instruments Inputs Inputs 2015 (Level 1) (Level 2) (Level 3) Interest rate swaps $ (768 ) $ — $ (768 ) $ — CTS’our interest rate swaps and foreign currency hedges were measured using a market approach which uses current industry information.standard valuation models using market-based observable inputs over the contractual terms, including forward yield curves, among others. There is a readily determinable market for these derivative instruments, but that market is not active and these swapstherefore they are classified within level 2 of the fair value hierarchy.liability related to interest rate swaps:assets (liabilities) for our derivative instruments:Interest($ in thousands)Rate SwapsBalance at January 1, 2014$(998)Total gains (losses) for the period:Included in earnings488Included in other comprehensive earnings(510)Balance at December 31, 2014$(1,020)Total gains (losses) for the period:Included in earnings382Included in other comprehensive earnings(409)Balance at June 28, 2015$(1,047) Foreign Interest Currency Rate Swaps Hedges Balance at January 1, 2015 $ (1,020 ) $ — Realized gains (losses) included in earnings 768 — Unrealized gains (losses) (516 ) — Balance at December 31, 2015 $ (768 ) $ — Realized gains (losses) included in earnings 472 3 Unrealized gains (losses) (184 ) 31 Balance at June 30, 2016 $ (480 ) $ 34 CTS’a revolving credit facilitythe Revolving Credit Facility which is recorded at its carrying value. There is a readily determinable market for CTS’ revolving creditCTS' long-term debt and it is classified within Level 2 of the fair value hierarchy as the market is not deemed to be active. The fair value of long-term debt was measured using a market approach which uses current industry information and approximates carrying value.1516 — Income Taxes2015the first quarter 2016 and 20142015 are as follows:(75.7) 34.0 (27.7) 38.7 The 2015 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Effective tax rate 34.7 % (75.7 )% 34.5 % (27.7 )% the three months ended June 28, 2015 reflects two significant discrete items. First, there was an increase34.7% and (75.7)% in the effectivesecond quarter of 2016 and 2015, respectively. The tax rate in the second quarter and first six months of 45.7 percentage points due2016 reflected the change in the mix of earnings by jurisdiction, the impact of discrete items, the company’s decision to no longer permanently reinvest the earnings of its Canadian and U.K. subsidiaries, and tax expense for withholding taxes on earnings in China that are not anticipated to be maintained in China. CTS began recording tax expense for withholding taxes in China in the fourth quarter of 2015 and expects to continue this practice going forward. During the second quarter and first six months of 2015, CTS reflected a benefit attributable to filing amended U.S. federal tax returns in order to take credits for foreign taxes paid which was partially offset by a reserve recorded on an uncertain tax position. Second, there was a decrease in the effective rate of 145.5 percentage points due to CTS’ intent to file amended tax returns for years ended 2006 to 2013, in which the treatment of foreign taxes will be changed from deductions to credits. For the six months ended June 28, 2015, the effect of the uncertain tax benefits increased the effective tax rate by 25.0 percentage points and the effect of amending the tax returns for 2006 to 2013 decreased the effective rate by 79.5 percentage points.The 2014 effective tax rate reflected the effect of a tax adjustment that decreased the effective rate by 2.6 percentage points in the second quarter of 2014 and increased the effective rate by 2.7 percentage points in the first six months of 2014.and six months ended June 30, 2016, and June 28, 2015, CTS accrued approximately $820,000$186 and $820 of potential interest intoor penalties in income tax expenseexpense. Fair Values at March 11, 2016 Current assets $ 4,215 Property, plant and equipment 6,173 Other assets 37 Goodwill �� 27,879 Intangible assets 35,427 Fair value of assets acquired 73,731 Less fair value of liabilities acquired (668 ) Net cash paid $ 73,063 a foreignthe acquisition is expected to be deductible for tax item. Forpurposes.Intangible Asset Type Fair Value Weighted Average Amortization Period (in years) Developed Technology $ 23,730 15.0 Customer Relationships and Contracts 11,502 14.6 Other 195 0.8 Total $ 35,427 For the period
March 11, 2016
through
June 30, 2016Net sales $ 3,876 Net loss $ 111 Three Months Ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Net sales $ 98,693 $ 103,689 $ 197,710 $ 205,290 Net earnings $ 14,487 $ 19,640 $ 22,249 $ 26,298 Earnings per share: Basic $ 0.44 $ 0.59 $ 0.68 $ 0.79 Diluted $ 0.44 $ 0.59 $ 0.67 $ 0.78 monthsmonth periods ended June 29, 2014, CTS did not accrue any interest or penalties into income tax expense. 1618 — Recent Accounting Pronouncements2015-08, “2016-9 Business Combinations"Compensation-Stock Compensation (Topic 805)718): Pushdown Accounting – amendmentsImprovement to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115Employee Share Based Payment Accounting"”May 2015,March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”("ASU") 2015-08, “Business Combinations (Topic 805): Pushdown Accounting – amendmentsNo. 2016-09, “Improvements to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115”.Employee Share-Based Payment Accounting.” This ASU amends various SEC paragraphs included in the FASB’s ASC to reflect the issuance of Staff Accounting Bulletin (“SAB”) No. 115. SAB 115 rescinds portionssimplifies several aspects of the interpretiveaccounting for share-based payment transactions, including the income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance included in the SEC’s Staff Accounting Bulletin series and brings existing guidance into conformity with ASU 2014-17, Pushdown Accounting, which provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.An acquired entity is not only able to apply this amendment to change in control events occurring after the effective date, but is also permitted to apply pushdown accounting as a change in accounting principle to its most recent change in control event that had occurred before the effective date of this new amendment. The decision to apply pushdown accounting to a specific change in control event, if elected by an acquiree, is irrevocable.The amendment also amends the reporting for a bargain purchase option. The acquired entity would not report a gain in its income statement as a result of a bargain purchase. Rather, the acquiree shall recognize the bargain purchase gain recognized by the acquirer as an adjustment to additional paid-in capital.This amendment is effective immediately. These provisions are not anticipated to have a material impact on our financial statements.ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”In May 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU permits a reporting entity, as a practical expedient, to measure the fair value of certain investments using the net asset value per share of the investment. This amendment applies to reporting entities that elect to measure the fair value of an investment within the scope of paragraphs 820-10-15-4 through 15-5 using the net asset value per share (or its equivalent) practical expedient in paragraph 820-10-35-59. This amendment removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. It also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient.The amendments will be effective for annual periods, including interim periods within those annualreporting periods beginning after December 15, 2015.2016, including interim periods. Early adoption is permitted. An entity should applythat elects early adoption of the amendments retrospectively toamendmentperiods presented. The retrospective approach requires that an investment for which fair value is measured usingaspects of the net asset value per share practical expedient be removed fromamendment in the fair value hierarchy in all periods presented in an entity’s financial statements. These provisionssame period. We are not anticipated tocurrently evaluating the impact this guidance will have a material impact on our consolidated financial statements.2015-04, “2016-5 Compensation – Retirement Benefits"Derivatives and Hedging (Topic 715)815): Practical Expedient forEffect of Derivative Contract Novations on Existing Hedge Accounting Relationships" Measurement Date of an Employer’s Benefit Obligation and Plan Assets”In April 2015, FASB issued ASU 2015-04, “Compensation –Retirement BenefitsNo. 2016-5 "Derivatives and Hedging (Topic 715)815): Practical Expedient forEffect of Derivative Contract Novations on Existing Hedge Accounting Relationships". This amendment clarifies that a change in the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets”. The amended guidance permits companiescounterparty to use a practical expedient which allows an employer to measure defined benefit plan assets and obligations asderivative instrument does not on its own require dedesignation of the month-end datehedging instrument under Topic 815, provided that is closestall other hedge accounting criteria (including those in paragraphs 815-20-35-14 through 35-18) continue to the employer’s fiscal year-end (alternative measurement date). An employer using this policy election must apply it consistently to all of its defined benefit plans. In accordance with this ASU, an employer using the practical expedient is required to adjust the funded status for contributionsbe met. This update can be applied prospectively or retrospectively and other significant events (as defined in paragraph 715-30-35-66) occurring between the alternative measurement date and its fiscal year-end. Paragraph 715-30-35-66 defines a significant event as: a plan amendment, settlement, or curtailment that calls for remeasurement. This ASU also allows employers the use of the practical expedient in interim remeasurements of significant events.The employer would be required to disclose the election to use the practical expedient and the measurement date of the plan assets and obligations. Early application of this ASU is permitted. Entities must apply the guidance prospectively. The guidance is effective for financial statements for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The changes would be effective for employee benefit plans for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. These provisions arethose years. This update is not anticipatedexpected to have a materialan impact onto our financial statements.2015-05, “2016-2 Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement"Leases (Topic 842)"”April 2015,February 2016, the FASB issued ASU 2015-05, “Intangibles—Goodwill2016-2, "Leases (Topic 842)". This amendment created a new Topic under the accounting standards codification to account for the provisions of the ASU. This amendment is meant to provide transparency and Other—Internal-Use Software (Subtopic 350-40) Customer’s Accountingto improve comparability between entities. The ASU requires companies to record an asset and liability to the balance sheet for Fees Paid inleases that were formerly designated as operating leases as well as leases designated as financing leases. The provisions of the ASU predominately change the recognition of leases for lessees, the provisions do not substantially change the accounting for lessors. This ASU will supersede the provisions of Topic 840 Leases.Cloud Computing Arrangement”. The amendments inlease is meant to recognize the lease payments and the asset as a right to use the underlying asset for the lease, including optional periods if it is reasonably certain the option will be exercised. Recording of the liability should be based on the present value of the lease payments. If a lease term is less than twelve month, a company is allowed to elect not to record the asset and liability. Expense related to these leases are to be amortized straight-line over the term of the lease.to customers abouton separating lease terms from maintenance and other type of provisions that provide a customer’sgood or service, accounting for fees paidsale-leaseback provisions, and leveraged leases.a cloud computing arrangement. This ASU clarifies that if a cloud computing arrangement includes a software license, then the customer should account forcash flow statement remains virtually unchanged as the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidancelease payments will not change U.S. GAAP for a customer’s accounting for service contracts. All software licensescontinue to be recognized within the scope of Subtopic 350-40 will be accounted for consistent with other licenses of intangible assets.The amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. For prospective transition, the disclosure requirements at transition include the nature offinancing activities and reason for the change in accounting principle,interest within operating activities. Reporting for operating leases remain within operating activities. Additional qualitative and quantitative disclosures are required.transition method, and a qualitative descriptionbeginning of the financial statement line items affected byearlier period presented. The modified approach provides optional practical expedients that may be elected, which will allow companies to continue to account for leases under the change. For retrospective transition, the disclosure requirements at transition include the requirements for prospective transition and quantitative information about the effects of the accounting change. These provisions are not anticipated to have a material impact on our financial statements.ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs”. The amended guidance require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurementprevious guidance for debt issuance costs are not affected byleases that commenced prior to the amendments in this ASU. effective date.amendments inprovisions of this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015,2018, and interim periods within those fiscal years.ASU is permitted forguidance are still being evaluated and the impact on CTS' financial statements that havehas not yet been previously issued. Entities must apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These provisions are not anticipated to have a material impact on our financial statements.2014-12, “2015-17, Compensation – Stock Compensation“Income Taxes (Topic 718)740): Accounting for Share-Based Payments When the TermsBalance Sheet Classification of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service PeriodDeferred Taxes””June 2014, theNovember 2015, FASB issued ASU 2014-12, “Compensation — Stock Compensation2015-17, "Income Taxes (Topic 718)740): Accounting for Share-Based Payments When the TermsBalance Sheet Classification of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”Deferred Taxes".The amended guidanceamendment requires that a performance target that affects vesting and that could be achieved after the requisite service period should be treatedCompany's to begin classifying all deferred income taxes as a performance condition.Current U.S. GAAP does not contain explicit guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an award.non-current. The amendments in this update provide explicit guidance for those awards.The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments either prospectively to all awards granted or modified after the effective date, or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. These provisions are not anticipatedexpected to have a material impact on our financial statements.ASU 2014-09, “Revenue from Contractssimplify the presentation of deferred income taxes and align the presentation of deferred income taxes with Customers”In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. The guidance in this ASU affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The new revenue recognition guidance more closely aligns U.S. GAAP with International Financial Reporting Standards ("IFRS"). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customersamendments in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.To achieve that core principle, an entity should apply the following steps:Step 1:Identify the contract(s) with a customer.Step 2:Identify the performance obligations in the contract.Step 3:Determine the transaction price.Step 4:Allocate the transaction price to the performance obligations in the contract.Step 5:Recognize revenue when (or as) the entity satisfies a performance obligation.The guidance isthis update are effective for annual periods beginning after December 16, 2016, and interim periods within those annual periods. The update can be applied prospectively or retrospectively.provided that it is not before the original effective date offor annual periods beginning after December 15, 2016. These provisions2016, and interim periods within that annual period. In addition, in April 2016 the FASB issued ASU 2016-10 "Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)", which amends the revenue guidance on identifying performance obligations and accounting for intellectual property licenses. In May 2016, the FASB issued ASU 2016-12 "Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients (Topic 606)", which provides additional guidance in assessing whether a transaction meets the definition of this guidance are still being evaluated.revenue, in narrowed circumstances during the transition to ASU 2014-09 and subsequent to implementation. This update can either be applied under either a cumulative effect or retrospective method. ASU 2016-10 and ASU 2016-12 must be adopted concurrently with ASU 2014-09. The impact of ASU 2014-9 on CTS'our financial statements has not yet been determined.72014.globalleading designer and manufacturer of products that Sense, Connect and Move. CTS manufactures sensors, actuators and electronic components in North America, Europe and sensors used primarilyAsia, and supplies these products to OEMs in the automotive,aerospace, communications, defense, industrial, information technology, medical and aerospace, medical, industrial and computertransportation markets.20152016 versus Second Quarter 201428, 201530, 2016, and June 29, 2014:28, 2015:100,071 102,980 (2.8) 100.0 100.0 66,698 69,157 (3.6) 66.7 67.2 33,373 33,823 (1.3) 33.3 32.8 15,224 15,813 (3.7) 15.2 15.4 5,487 5,332 2.9 5.5 5.2 2,118 2,733 (22.5) 2.1 2.7 22,829 23,878 (4.4) 22.8 23.2 10,544 9,945 6.0 10.5 9.7 315 (303) (204.0) 0.3 (0.3) 10,859 9,642 12.6 10.9 9.4 (8,221) 3,281 (350.6) (8.2) 3.2 19,080 6,361 200.0 19.1 6.2 0.57 0.19 (1)Cost of goods sold includes restructuring related charges of $217 in 2015 and $338 in 2014. Three Months Ended Percent of Percent of June 30, June 28, Percent Net Sales – Net Sales – 2016 2015 Change 2016 2015 Net sales $ 98,693 $ 100,071 (1.4 ) 100.0 100.0 64,236 66,698 (3.7 ) 65.1 66.7 Gross margin 34,457 33,373 3.2 34.9 33.3 Selling, general and administrative expenses 15,764 15,224 3.5 16.0 15.2 Research and development expenses 5,967 5,487 8.7 6.0 5.5 Restructuring and impairment charges 206 2,118 (90.3 ) 0.2 2.1 (Gain) loss on sale of assets (11,577 ) 2 (578,950.0 ) (11.7 ) — Total operating expenses 10,360 22,831 (54.6 ) 10.5 22.8 Operating earnings 24,097 10,542 128.6 24.4 10.5 Total other (expense) income (1,918 ) 317 (705.0 ) (1.9 ) 0.3 Earnings before income taxes 22,179 10,859 104.2 22.5 10.8 Income tax expense (benefit) 7,692 (8,221 ) (193.6 ) 7.8 (8.2 ) Net earnings $ 14,487 $ 19,080 (24.1 ) 14.7 19.0 Earnings per share: Diluted net earnings per share $ 0.44 $ 0.57 $100,071,000$98,693 in the second quarter of 20152016 decreased $2,909,000$1,378 or 2.8%(1.4)% from the second quarter of 2014.2015. Sales to automotive markets decreased $2,819,000$2,061 due to lower volumes and unfavorable foreign exchange impact. Other sales increased $683 due to the addition of sales from the single crystal acquisition which approximately $2,100,000 was due topartially offset by lower demand for electronic components in certain end markets. Changes in foreign exchange rates caused $398 of the total sales decrease, driven by the U.S. Dollar appreciating compared to the Euro.2015 compared to 32.8% in the second quarter of 2014.2015. The increase in gross margin resulted from cost savings from continued efficiency gains, material and labor productivity projects, and savings from restructuring projects implemented overand the past several quarters. The impactaddition of sales from the single crystal acquisition. In addition, foreign currency on gross margin was negligible. The unfavorable impact on sales was offset byexchange rates had a favorable impact on costmanufacturing costs as the U.S. Dollar appreciated against various local currencies in countries in which we have manufacturing operations.$15,224,000$15,764 or 15.2%16.0% of sales in the second quarter of 20152016 versus $15,813,000$15,224 or 15.4%15.2% of sales in the comparable quarter of 2014.2015. The decreaseincrease is primarily attributable to added costs as a result of the single crystal acquisition, including amortization of intangibles. Selling and marketing expenses were also higher as CTS continues tosecond quarter of 2015 was primarily due to continued efficiency gains from restructuring projects implemented over the past several quarters.$5,487,000$5,967 or 5.5%6.0% of sales in the second quarter of 20152016 compared to $5,332,000$5,487 or 5.2%5.5% of sales in the comparable quarter of 2014.2015. The increase was related to continued investment in new products to drive organic growth. Research and development expenses are focused on expanded applications of existing products and new product development as well as current product and process enhancements.totaled $2,118,000 and2016 compared to $2,118 or 2.1% of sales in the second quarter of 2015. The 2016 charges are for severance costs related to the restructuring of certain operations as part of the 2016 Restructuring Plan announced in June 2016. The 2015 charges consist primarily of accruals for severance transition and shutdown costs related to the consolidation of CTS’CTS' Canadian operation in Streetsville, Ontario into other CTS facilities. Also includedthe 2015 charges are costs to close the Brugg facility as well as other severance and restructuring costsCanada in Singapore. The second quarter 2014 restructuring charges totaled $2,733,000 and consist primarily of severance accruals related to the consolidation of CTS’ Canadian operation into other CTS facilities. Restructuring related costs included in cost of goods sold are primarily equipment related relocation costs which were higher in the second quarter of 2014 when compared to the second quarter of 2015.$10,544,000$24,097 or 10.5%24.4% of sales in the second quarter of 20152016 compared to $9,945,000operating earnings of $10,542 or 9.7%10.5% of sales in the comparable quarter of 20142015 as a result of the items discussed above.(653) (582) 853 688 115 (409) 315 (303) Three Months Ended June 30, June 28, 2016 2015 Interest expense $ (1,009 ) $ (653 ) Interest income 331 853 Other (expense) income, net (1,240 ) 117 Total other (expense) income $ (1,918 ) $ 317 slightly in the second quarter of 20152016 versus the second quarter of 2014.2015 as a result of higher borrowings related to the single crystal acquisition. Interest income increased primarilydecreased due to higherlower cash balances. The increase in otherOther expense in the second quarter of 2015 was driven by favorable2016 is largely the result of foreign currency gains,translation losses, primarily due to the appreciation of the U.S. Dollar compared to the Euro and Chinese Renminbi, while other expenseRenminbi. Other income in the second quarter of 20142015 was driven by foreign currency translation losses, primarily due to the depreciation of the U.S. Dollar compared to the Chinese Renminbi.gains.(75.7) 34.0 The Three Months Ended June 30, June 28, 2016 2015 Effective tax rate 34.7 % (75.7 )% negative 75.7% which reflects two significant discrete items. First, there was an increase in the effective rate of 45.7 percentage points due topartially offset by a reserve recorded on an uncertain tax position. Second, there was a decrease in the effective rate28, 201530, 2016 versus sixSix months ended June 29, 2014month periodsmonths ended June 28, 201530, 2016, and June 29, 2014:(Amounts in thousands, except percentages and per share amounts):198,382 203,686 (2.6) 100.0 100.0 132,873 139,248 (4.6) 67.0 68.4 65,509 64,438 1.7 33.0 31.6 30,935 29,454 5.0 15.6 14.5 10,686 10,958 (2.5) 5.4 5.4 2,856 3,236 (11.7) 1.4 1.6 44,477 43,648 1.9 22.4 21.4 21,032 20,790 1.2 10.6 10.2 (1,169) (2,123) (44.9) (0.6) (1.0) 19,863 18,667 6.4 10.0 9.2 (5,504) 7,226 (176.2) (2.8) 3.5 25,367 11,441 121.7 12.8 5.6 0.75 0.33 Six Months Ended Percent of Percent of June 30, June 28, Percent Net Sales – Net Sales – 2016 2015 Change 2016 2015 Net sales $ 195,398 $ 198,382 (1.5 ) 100.0 100.0 127,472 132,873 (4.1 ) 65.2 67.0 Gross margin 67,926 65,509 3.7 34.8 33.0 Selling, general and administrative expenses 30,411 30,935 (1.7 ) 15.6 15.6 Research and development expenses 12,130 10,686 13.5 6.2 5.4 Restructuring and impairment charges 206 2,856 (92.8 ) 0.1 1.4 (Gain) loss on sale of assets (11,351 ) (1 ) 1,135,000.0 (5.8 ) — Total operating expenses 31,396 44,476 (29.4 ) 16.1 22.4 Operating earnings 36,530 21,033 73.7 18.7 10.6 Total other (expense) income (2,386 ) (1,170 ) 103.9 (1.2 ) (0.6 ) Earnings before income taxes 34,144 19,863 71.9 17.5 10.0 Income tax expense (benefit) 11,794 (5,504 ) (314.3 ) 6.0 (2.8 ) Net earnings $ 22,350 $ 25,367 (11.9 ) 11.4 12.8 Earnings per share: Diluted net earnings per share $ 0.67 $ 0.75 costscharges of $292$0 in 20152016 and $910$75 in 2014.$198,382,000$195,398 in the first six months of 2015ended June 30, 2016 decreased $5,304,000$2,984 or 2.6%(1.5)% from the comparable period of 2014.six months ended June 28, 2015. Sales to automotive markets decreased $6,522,000$1,461 due to lower volumes and unfavorable foreign exchange impact. Other sales declined $1,523 due to lower demand for electronic components in certain end markets, which was partially offset by the addition of which approximately $4,500,000 was due tosales from the single crystal acquisition. Changes in foreign exchange rates caused $1,097 of the total sales decrease, driven by the U.S. Dollar appreciating compared to the EuroChinese Renminbi and Chinese Renminbi. Otherrelating mostly to sales were $1,218,000 higher driven by higher shipments of electronic components.six monthshalf of 2015 versus 31.6% in the comparable period of 2014.2015. The increase in gross margin resulted from cost savings from continued efficiency gains, material and labor productivity improvements, mixprojects, savings from restructuring projects and favorablethe addition of sales from the single crystal acquisition. In addition, foreign exchange rates had a favorable impact on operating results and continued benefits from prior restructuring actions.$30,935,000$30,411 or 15.6% of sales in the six monthsix-month period of 2015ended June 30, 2016 versus $29,454,000$30,935 or 14.5%15.6% of sales in the comparable year-to-date period in 2015. Expenses in 2016 include added costs as a result of 2014.the single crystal acquisition, including amortization of intangibles. Selling and marketing expenses were higher as CTS continues to invest to drive future growth. The slight increaseincreases were offset by lower general and administrative expenses in 2015 is attributable to higher employee related costs.$10,686,000$12,130 or 5.4%6.2% of sales in the six month period endingmonths ended June 28, 201530, 2016 compared to $10,958,000$10,686 or 5.4% of sales in the comparable period of 2014.prior year period. The increase was related to continued investment in new products to drive organic growth. Research and development expenses are primarily focused on expanded applications of existing products and new product development as well as current product and process enhancements.six month period endingrestructuring of certain operations as part of the 2016 Restructuring Plan announced in June 28,2016. The 2015 totaled $2,856,000 andcharges consist primarily of accruals for severance training and shutdown costs related to the consolidation of CTS’CTS' Canadian operation in Streetsville, Ontario into other CTS facilities. AlsoThe information as set forth under Note 7, Costs Associated with Exit and Restructuring Activities, in the condensed consolidated financial statements included in 2015 are costs to closePart I, Item 1 of this report is incorporated herein by reference.Brugg facility as well as other severance and restructuring costsgain on sale of the building in Singapore. Restructuring and impairment charges for the six month period endingCanada in June 29, 2014 totaled $3,236,000 and consist primarily2016.$21,032,000$36,530 or 18.7% of sales in the six months ended June 30, 2016 compared to operating earnings of $21,033 or 10.6% of sales forin the six month period endingmonths ended June 28, 2015 compared to $20,790,000 or 10.2% of sales in the comparable period of 2014 as a result of the items discussed above.(1,241) (1,195) 1,641 1,252 (1,569) (2,180) (1,169) (2,123) Six Months Ended June 30, June 28, 2016 2015 Interest expense $ (1,829 ) $ (1,241 ) Interest income 879 1,641 Other expense, net (1,436 ) (1,570 ) Total other expense $ (2,386 ) $ (1,170 ) slightly in the six month period ending June 28, 2015first half of 2016 versus the comparable period in 2014first half of 2015 as a result of higher outstanding borrowings in 2015.related primarily to the single crystal acquisition. Interest income increased primarilydecreased due to higherlower cash balances. Other expense in the six month period ending June 28, 2015 has decreased asfirst half of 2016 is largely the amountresult of foreign currency related impacttranslation losses, primarily due to the appreciation of the U.S. Dollar compared to the Chinese Renminbi. Other expense in the second half of 2015 was lower thanalso driven by foreign currency impact in same periodtranslation losses, primarily due to the appreciation of 2014.the U.S. Dollar compared to the Euro.(27.7) 38.7 The Six Months Ended June 30, June 28, 2016 2015 Effective tax rate 34.5 % (27.7 )% for the six months ending June 28, 2015 was a negative 27.7% which reflects two significant discrete items. First, there was an increase34.5% and (27.7)% in the effective rate of 25.0 percentage points due to a reserve on an uncertain tax position. Second, there was a decrease in the effective rate of 79.5 percentage points due to CTS’ intent to file amended tax returns for the years ended 2006 through 2013, in which the treatment of foreign taxes will be changed from deductions to credits. CTS will also file its 2014 tax return treating foreign taxes as a credit. The effective income tax rate for the six months ending June 29, 2014 was 38.7%. The 2014 effective rate includes the effect of tax adjustments for the first six months of 20142016 and 2015, respectively. The tax rate in the first six months of 2016 reflected the change in the mix of earnings by jurisdiction, the impact of discrete items, the company’s decision to no longer permanently reinvest the earnings of its Canadian and U.K. subsidiaries, and tax expense for withholding taxes on earnings in China that are not anticipated to be maintained in China. CTS began recording tax expense for withholding taxes in China in the fourth quarter of 2015 and expects to continue this practice going forward. In the first six months of 2015, the tax rate reflected a benefit attributable to filing amended U.S. federal tax returns in order to take credits for foreign taxes paid which increased the effective ratewas partially offset by 2.7 percentage points.$146,791,000$119,912 at June 28, 201530, 2016 and $134,508,000$156,928 at December 31, 2014.2015, of which $118,608 and $ 156,310, respectively, were held outside the United States. The increasedecrease in cash and cash equivalents of $37,016 was primarily driven by cash used in investing activities of $68,309, which included a payment for a business acquisition in the amount of $73,063, capital expenditures of $7,483 and proceeds from the sale of assets of $12,237, offset by net borrowings on our credit facility of $20,100 and cash generated from operations which exceeded the cash used for financing and investing activities.of $13,755. Total debt was $110,800 as of June 28, 2015 was $88,700,00030, 2016 and at$90,700 as of December 31, 2014 was $75,000,000.2015. Total debt as a percentage of total capitalization, was 22.5% at June 28, 2015 compared to 20.6% at December 31, 2014. Total debt as a percentage of total capitalization is defined as the sum of notes payable and long-term debt as a percentage of total debt and shareholders’ equity.increaseddecreased by $17,759,000 from December 31, 2014 to$27,957 during the six months ended June 28, 2015,30, 2016, primarily due to a $6,152,000 increase in accounts receivable, a $12,283,000 increasethe aforementioned decrease in cash and cash equivalents and a $2,537,000 increase in inventories which were partially offset by a $2,381,000$7,562 increase in accounts payable.$15,494,000$13,755 during the first six months of 2015.2016. Components of net cash provided by operating activities included net earnings of $25,367,000,$22,350, depreciation and amortization expense of $8,093,000$8,925, and net changesequity-based compensation of other non-cash items such as the prepaid pension asset, equity based compensation, restructuring charges and$967 offset by amortization of retirement benefits totaling $4,092,000 which were offset bybenefit adjustments of $794, net changes in assets and liabilities of $22,058,000. The net changes in$9,468 and other non-cash items such as gains on sales of fixed assets, and liabilities were primarily driven by increases in deferred income taxes, restructuring charges and accounts receivable.20152016 was $3,902,000,$68,309, which was primarilyincludes a payment for a business acquisition of $73,063, net of cash acquired, proceeds from the sale of assets of $12,237 and $7,483 for capital expenditures.usedprovided by financing activities for the first six months of 2016 was $18,184. These cash inflows were the result of net borrowings under our credit facility totaling $20,100, windfall tax benefits from equity awards of $696 offset by dividend payments of $2,612.$126,000. The primary driver for the cash inflow from financing activities wasterminated on August 10, 2015. On May 23, 2016, CTS requested and received a $13,700,000$100,000 increase in net borrowings, which was offset by $11,369,000 paid to purchase shares of CTS common stock and $2,668,000 of dividend payments.Capital ResourcesCTS has an unsecuredthe aggregate revolving credit facility,commitments under its existing credit agreement, which matures on January 10, 2017.88,700 75,000 1.4 1.5 108,985 122,535 200,000 200,000 2,315 2,465 0.25 0.25 As of June 30, December 31, 2016 2015 Revolving credit facility due in 2020 $ 110,800 $ 90,700 Weighted average interest rate 1.9 % 1.5 % Amount available $ 187,035 $ 106,985 Total credit facility $ 300,000 $ 200,000 Standby letters of credit $ 2,165 $ 2,315 Commitment fee percentage per annum 0.30 % 0.25 % revolving credit facilityRevolving Credit Facility requires, among other things, that CTS comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Failure of CTS to comply with these covenants could reduce the borrowing availability under the revolving credit facility.Revolving Credit Facility. CTS was in compliance with all debt covenants at June 28, 2015.revolving credit facility’sRevolving Credit Facility’s variable rate of interest into a fixed rate. In the second quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $50,000,000$50,000 of long-term debt for the periods January 2013 to January 2017. In the third quarter of 2012, CTS entered into four separate interest rate swap agreements to fix interest rates on $25,000,000$25,000 of long-term debt for the periods January 2013 to January 2017. The difference to be paid or received under the terms of the swap agreements will beis recognized as an adjustment to interest expense when settled.During the first six months of 2015, we repurchased 626,882 shares of CTS common stock at a total cost of $11,369,000, or an average price of $18.14 per share.As of June 28, 2015, CTS’ intentpermanently reinvest fundsthe earnings of its non-U.S. subsidiaries outside the U.S. However, CTS determined during 2015 that as a result of changes in the business, the foreign earnings of its subsidiaries in Canada and the U.K. were no longer permanently reinvested. Therefore, a provision for the expected taxes on repatriation of those earnings was recorded at that time. Any repatriation may not result in significant cash income tax payments as the taxable event would likely be offset by the utilization of the then available tax credits, resulting in no significant net operating losses and tax credits.cash taxes being incurred. CTS does not provide for U.S. income taxes on undistributed earnings of its foreign subsidiaries that are intended to be permanently reinvested.credit agreements.Revolving Credit Facility. We believe that cash flows from operating activities and available borrowings under our current credit agreementsRevolving Credit Facility will be adequate to fund our working capital, capital expenditures and debt service requirements for at least the next twelve months. However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions.CTS’CTS' reported financial results.customer’scustomer's current credit worthiness,Limited credit insurance on the majority of our international receivables.uponon historical experience and specific customer collection issues. Over the last three years, accounts receivable allowance varied fromreserves have been approximately 0.2% to 0.5% of total accounts receivable. We believe our allowance for doubtful accountsreserve level is appropriate considering the quality of the portfolio. While credit losses have historically been within expectations and the provisionsreserves established, we cannot guarantee that our credit loss experience will continue to be consistent with historical experience.first‑in, first‑out (“FIFO”first-in, first-out ("FIFO") method, or the current estimated market value. We review inventory quantities on hand and record a reserveprovision for excess and obsolete inventory based on forecasts of product demand and production requirements.8.1%18.0% to 15.6%20.1% of gross inventory. We believe our reserve level is appropriate considering the quantities and quality of the inventories.high‑qualityhigh-quality bonds currently available and expected to be available during the period to maturity of the pension benefit in order to provide the necessary future cash flows to pay the accumulated benefits when due. After considering the recommendations of our actuaries, we have assumed a discount rate, expected rate of return on plan assets and a rate of compensation increase in determining our annual pension income and expense and the projected benefit obligation. 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. Changes in the actuarial assumptions could have a material effect on our results of operations.between annual testsannually, or more frequently if an event occurs or circumstances change that would more likely than notmore-likely-than-not reduce the fair value of a reporting unit below its carrying amount. Examples of such events or circumstances include:Loss of key personnel,More‑likely‑than‑notdisposed of.it performswe perform an impairment test. The performance of the test involves a two‑steptwo-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We generally determine the fair value of our reporting units using two valuation methods: Income"Income Approach — Discounted Cash Flow MethodMethod" and Market"Market Approach — Guideline Public Company Method.Method". The approach defined below is based upon our last impairment test conducted as of December 31, 2014.“Income"Income Approach — Discounted Cash Flow Method”Method", the key assumptions consider sales, cost of sales and operating expenses projected through the year 2018.2020. These assumptions were determined by management utilizing our internal operating plan and assuming growth rates for revenues, and operating expenses, and gross margin assumptions. The fourth key assumption under this approach is the discount rate which is determined by looking at current risk‑freerisk-free rates, of capital, current market interest rates and the evaluation of risk premium relevant to the business segment. If our assumptions relative to growth rates were to change or were incorrect, our fair value calculation may change which could result in impairment.“Market"Market Approach — Guideline Public Company Method”Method", we identified eight publicly traded companies, including CTS, which we believe have significant relevant similarities. For these eight companies, we calculated the mean ratio of invested capital to revenues and invested capital to EBITDA. Similar to the Income approach discussed above, sales, cost of sales, operating expenses and their respective growth rates were the key assumptions utilized. The market prices of CTS and other guideline company shares are also key assumptions. If these market prices increase, the estimated market value would increase. If the market prices decrease, the estimated market value would decrease.management’smanagement's determination. The Market approach is based upon historical and current economic conditions, which might not reflect the long‑termlong-term prospects or opportunities for CTS’CTS' business being evaluated.unit’sunit's fair value, we perform the second step of the goodwill impairment test to determine the amount of impairment loss. The second step of the goodwill impairment testloss, which involves comparing the implied fair value of the affected reporting unit’sunit's goodwill with the carrying value of that goodwill.updatingupdates to the assumptions to reflect the current market environment. As discussed above, key assumptions used in the first step of the goodwill impairment test were determined by management utilizing theCTS' internal operating plan. The key assumptions utilized include forecasted growth rates for revenues and operating expenses as well as a discount rate which is determined by looking at current risk‑freerisk-free rates of capital, current market interest rates and the evaluation of a risk premium relevant to the business segment. CTS will monitor future results and will perform a test if indicators trigger an impairment review.the endOctober 1, 2015, and there have been no further indicators of December 2014.Long‑LivedLong-Lived and Other Intangible Assetslong‑livedlong-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered that may trigger an impairment review consist of:CTS’CTS' stock price for a sustained period, and has failed in the case of amortizable assets, it measures impairment based on projected discounted cash flows using a discount rate that incorporates the risk inherent in the cash flows. has identified, evaluated, and measured the amount of income tax benefits to be recognized for all of our income tax positions. Included in deferred tax assets are amounts related to federal, state and foreign net operating losses. CTS intends to utilize these net operating loss carryforwards to offset future income taxes.CTS’ locally, CTS could elect to repatriate funds held in foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. Repatriation couldwould result in a higher effective tax rates.rate. Borrowing in the U.S. would result in increased interest expense.Customersignificant customers as a percentagerepresenting at least 10% of total net sales were as follows:10.3 10.5 9.9 10.2 No other customer accounted for 10% or more of total net sales during these periods. Three months ended Six Months Ended June 30, June 28, June 30, June 28, 2016 2015 2016 2015 Honda Motor Co. 10.3 % 10.3 % 11.0 % 9.9 % Toyota Motor Corporation 10.8 % 10.0 % 10.7 % 9.2 % Cummins Inc. 9.6 % 8.7 % 10.0 % 8.5 % thisCTS' Annual Report on Form 10‑K for the fiscal year ended December 31, 2014.2015. We undertake no obligation to publicly update our forward‑looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.2014.2015.28, 2015.28, 201530, 2016, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. We manufacture accelerator pedals for a number of automobile manufacturers, including subsidiaries of Toyota. In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The recall expandedinclude vehicles in Europe and Asia. The pedal recall and associated events have led to us being named as a co‑defendant with Toyota in certain litigation in the United States and Canada. CTS is not aware of any legal actions filed in Asia or Europe against CTS at this time.In February 2010, we entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold us harmless from, and the parties will cooperate in the defense of, certain third‑party civil claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. Under our agreement with Toyota, if it is determined that CTS acted negligently in selecting materials or processes where we had sole control over the selection process, in failing to meet Toyota’s specifications, or in making unapproved changes in component design or materials, and such negligence caused or contributed to a claim, we will be responsible for any judgment that may be rendered against us individually, or any portion of a judgment that may be allocated to us, but limited only to the extent of insurance collected from our insurers. Toyota would remain responsible to defend CTS in these actions and would remain responsible for any balance of the remaining liability over amounts recovered by insurance. The agreement also does not cover costs or liabilities in connection with government investigations, government hearings, or government recalls.Presently, we have been served process and are a named co‑defendant with Toyota in approximately thirty‑one lawsuits. The claims generally fall into two categories, those that allege sudden unintended acceleration of Toyota vehicles led to injury or death, and those that allege economic harm to owners of Toyota vehicles related to vehicle defects. Some suits combine elements of both. Claims include demands for compensatory and special damages. To date, the only actions filed wheretime we are aware we have been named as a co‑defendant are civil actions filedinvolved in the Unites States or Canada. All currently open lawsuits are subject to the indemnification agreement described above. Some of these lawsuits arise out of incidents involving models for which we do not manufacture the pedal, such as all Lexus models, the Toyota Prius, and the Toyota Tacoma, or for which we manufacture only a portion of the pedals, such as the Toyota Camry. Many lawsuits have been consolidated in federal multidistrict litigation in the United States District Court, Southern District of California, though some remain in various other courts.Certain other claims are pending against us with respect to matters arising out offrom the ordinary conduct of our business. For all otherbusiness, and currently certain claims inare pending against us. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows. However, given the uncertainty, the complexity and the many variables involved in litigation and other claims, our actual costs may differ from our estimates.2014.2015.summarizes thethere were no stock repurchases of CTS common stock during the three monthsquarter ended June 28, 2015 made by the Company under the initial repurchase program originally announced on June 11, 2013:30, 2016.423,767 129,673 17.80 129,673 294,094 170,453 18.26 170,453 123,641 123,641 18.84 123,641 423,767 18.28 423,767 (c) Total Number (d) (a) of Shares Maximum Dollar Value Total Number of (b) Purchased as of Shares That May Yet Be Shares Average Price Part of Plans or Purchased Under the Purchased Paid per Share Program Balance at March 31, 2016 $ 17,554 April 1, 2016 - June 30, 2016 — — — $ — Total — — — $ 17,554 (1)On June 11, 2013, CTS announced that its Board of Directors authorized a program to repurchase up to one million shares of its common stock in the open market. This authorization has no expiration.The following table summarizes the repurchases of CTS common stock during the three months ended June 28, 2015 made by the Company under the expanded repurchase program announced on April 27, 2015:25,000,000 38,263 19.02 38,263 24,272,100 38,263 19.02 38,263 (2)On April 27, 2015, CTS announced that its Board of Directors authorized an expansion to its repurchase program by authorizing the purchase of an additional $25 million dollars of its common stock in the open market. This authorization has no expiration.(3)The combined number of shares of stock repurchased for this period, including the shares listed in the first table above, is 161,904 at an average price of $18.88.(4)The total combined number of shares of stock repurchased for this quarter, including the shares listed in the first table above, is 462,030 at an average price of $18.35.8(10)(a)Transition Agreement dated June 26, 2015, by and between CTS Corporation and Anthony Urban (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC onJuly 1, 2015).(31)(a) (31)(a)9SCTS CorporationCTS CorporationCTS Corporation CTS Corporation /s/ Robert J. PattonLuis F. MachadoRobert J. Patton28, 201528, 201529, 2016 10