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<SEC-DOCUMENT>0000026058-02-000018.txt : 20020430
<SEC-HEADER>0000026058-02-000018.hdr.sgml : 20020430
ACCESSION NUMBER:		0000026058-02-000018
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20020331
FILED AS OF DATE:		20020430

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CTS CORP
		CENTRAL INDEX KEY:			0000026058
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPONENTS & ACCESSORIES [3670]
		IRS NUMBER:				350225010
		STATE OF INCORPORATION:			IN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-04639
		FILM NUMBER:		02627306

	BUSINESS ADDRESS:	
		STREET 1:		905 W BLVD N
		CITY:			ELKHART
		STATE:			IN
		ZIP:			46514
		BUSINESS PHONE:		2192937511

	MAIL ADDRESS:	
		STREET 1:		905 W BLVD NORTH
		CITY:			ELKHART
		STATE:			IN
		ZIP:			46514
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>firstq10-qapril302002.txt
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    Form 10-Q


(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   March 31, 2002

                                       OR

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

for the transition period from _____________ to ________________

Commission File Number 1-4639

                                 CTS CORPORATION
             (Exact name of registrant as specified in its charter)

         Indiana                                35-0225010
         -------                                ----------
(State or other jurisdiction        (I.R.S. Employer Identification No.)
    of incorporation or
       organization)

        905 West Boulevard North
              Elkhart, IN                         46514
 (Address of principal executive offices)       (Zip Code)

Registrant's telephone number, including area code:  (574)293-7511

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

         Yes   X          No_______

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 26, 2002: 33,342,472.




                                     Page 1


<PAGE>


                        CTS CORPORATION AND SUBSIDIARIES

                                      INDEX

                                                                     Page
PART I. -- FINANCIAL INFORMATION

         Item 1.  Financial Statements

         Condensed Consolidated Statements of
         Earnings (Loss) - For the Three Months
         ended March 31, 2002, and April 1, 2001                        3

         Condensed Consolidated Balance Sheets -
         As of March 31, 2002, and December 31, 2001                    4

         Condensed Consolidated Statements of Cash
         Flows - For the Three Months Ended
         March 31, 2002, and April 1, 2001                              5

         Consolidated Statements of Comprehensive
         Earnings - For the Three Months Ended
         March 31, 2002, and April 1, 2001                              6

         Notes to Condensed Consolidated Financial
         Statements                                                     7-13

         Item 2.  Management's Discussion and Analysis
                      of Financial Condition and Results of
                      Operations                                       14-18

         Item 3.  Quantitative and Qualitative Disclosure
                         About Market Risk                             18

PART II. -- OTHER INFORMATION

         Item 1.  Legal Proceedings                                    18-19


         Item 6.  Exhibits and Reports on Form 8-K                     19


SIGNATURES                                                             19




                                     Page 2



<PAGE>

Part 1 -- FINANCIAL INFORMATION

Item 1.   Financial Statements

                        CTS CORPORATION AND SUBSIDIARIES
         CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)-UNAUDITED
               (In thousands of dollars, except per share amounts)

                                                           Three Months Ended
                                                     March 31,2002 April 1, 2001
                                                     ------------- ------------
    Net sales                                           $112,593      $176,988
    Costs and expenses:
      Cost of goods sold                                  89,915       136,423
      Selling, general and administrative expenses        15,317        25,020
      Research and development expenses                    7,133         9,780
                                                          ------       -------

      Operating earnings                                     228         5,765

    Other (expense) income:
      Interest expense                                    (2,670)       (3,366)
      Interest income                                         82           180
      Other                                                 (174)         (316)
                                                          ------        ------

    Total other expense                                   (2,762)       (3,502)
                                                          ------        ------

    Earnings (loss) before income taxes                   (2,534)        2,263
    Income tax expense (benefit)                            (633)          566
                                                          ------        ------

    Net earnings (loss)                                  $(1,901)       $1,697
                                                         =======        ======

    Net earnings (loss) per share - Note J

      Basic                                               ($0.06)        $0.06
                                                          ======         =====

      Diluted                                             ($0.06)        $0.06
                                                          ======         =====

    Cash dividends declared per share                      $0.03         $0.03
                                                          ======         =====

    Average common shares outstanding:
      Basic                                               31,802        27,671
      Diluted                                             31,802        28,750


See notes to condensed consolidated financial statements.





                                     Page 3

<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

                        CTS CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                            (In thousands of dollars)

                                                    March 31,       December 31,
                                                      2002             2001*
                                                    --------        -----------
ASSETS                                             (Unaudited)
Current Assets
  Cash                                              $7,672           $13,255
  Accounts receivable, less allowances
    (2002--$1,468; 2001--$1,470)                    80,068            81,563
  Inventories--Note B                               43,721            50,149
  Other current assets                               4,385             4,371
  Deferred income taxes                             51,563            51,336
                                                   -------           -------
     Total current assets                          187,409           200,674

Property, plant and equipment, less
 accumulated depreciation (2002--$214,383;
 2001--$207,212)
                                                   186,382           191,958
Other Assets
  Prepaid pension asset                            105,803           102,196
  Intangible assets - Note F                        43,017            44,004
  Assets held for sale--Note E                      21,799            21,940
  Other                                              6,396             7,159
                                                   -------           -------
     Total other assets                            177,015           175,299
                                                   -------           -------
                                                  $550,806          $567,931
                                                  ========          ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Current maturities of long-term debt-Note G      $12,522           $27,500
  Notes payable                                      1,389                --
  Accounts payable                                  48,826            50,842
  Accrued liabilities                               64,216            75,515
                                                   -------           -------
     Total current liabilities                     126,953           153,857

Long-term debt--Note G                             106,186           125,013
Other long-term obligations                          7,178             7,274
Deferred income taxes                               39,461            38,914
Shareholders' equity
  Preferred stock-authorized 25,000,000
   shares without par value; none issued                --                --
  Common stock-authorized 75,000,000 shares
   without par value; 49,764,102 shares
   issued at March 31, 2002, and 48,531,936
   shares issued at December 31, 2001              230,785           213,947
Additional contributed capital                      23,285            24,153
Retained earnings                                  274,089           276,988
Accumulated other comprehensive loss                (2,362)           (1,702)
                                                   -------           -------
                                                   525,797           513,386
Cost of common stock held in treasury
 2002--16,647,172 shares; 2001--17,630,192        (254,769)         (270,513)
                                                   -------           -------
     Total shareholders' equity                    271,028           242,873
                                                   -------           -------
                                                  $550,806          $567,931
                                                  ========          ========

 *The balance sheet at December 31, 2001, has been derived from the audited
  financial statements at that date.

  See notes to condensed consolidated financial statements.


                                     Page 4


<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

                        CTS CORPORATION AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS-UNAUDITED
                            (In thousands of dollars)

                                                         Three Months Ended
                                                        March 31,   April 1,
                                                          2002        2001
                                                          ----        ----
Cash flows from operating activities:
  Net earnings (loss)                                  $(1,901)    $  1,697
  Depreciation and amortization                         11,228       13,651
  Deferred income taxes                                     --         (797)
  Prepaid pension asset                                 (3,607)      (3,820)
Changes in assets and liabilities:
  Accounts receivable                                    1,495       35,905
  Inventories                                            6,428        7,134
  Other current assets                                    (485)        (451)
  Accounts payable and accrued liabilities             (12,803)     (49,870)
  Other                                                    341          312
                                                        ------       ------
  Total adjustments                                      2,597        2,064
                                                        ------       ------

  Net cash provided by operations                          696        3,761
                                                        ------       ------

Cash flows from investing activities:
  Capital expenditures                                  (4,673)     (32,107)
  Other                                                    135         (228)
                                                        ------       ------

  Net cash used in investing activities                 (4,538)     (32,335)

Cash flows from financing activities:
  Payments of long-term obligations                    (34,855)      (2,500)
  Proceeds from issuance of long-term obligations        1,050       24,000
  Net change in short-term borrowings                    1,389           --
  Dividend payments                                       (931)        (834)
  Proceeds from issuance of common stock                31,609           --
  Other                                                    108        1,484
                                                        ------       ------

Net cash provided by (used in) financing activities     (1,630)      22,150

Effect of exchange rate changes on cash                   (111)         (17)
                                                        ------       ------

Net decrease in cash                                    (5,583)      (6,441)
Cash at beginning of year                               13,255       20,564
                                                        ------       ------

Cash at end of period                                   $7,672      $14,123
                                                        ======      =======

Supplemental cash flow information
Cash paid (received) during the period for:
  Interest                                              $1,294       $3,178
  Income taxes--net                                     $ (153)      $2,421

 See notes to condensed consolidated financial statements.




                                     Page 5


<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

                        CTS CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - UNAUDITED
                            (In thousands of dollars)



                                                    Three Months Ended
                                                March 31,2002  April 1,2001
                                                -------------  ------------
       Net earnings (loss)                        $(1,901)           $1,697
       Other comprehensive earnings (loss):
         Cumulative translation adjustments          (410)             (980)
         Deferred gain on forward contract           (250)               --
                                                  -------            ------
             Comprehensive earnings (loss)        $(2,561)           $  717
                                                  =======            ======


See notes to condensed consolidated financial statements.

































                                     Page 6


<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
                                  March 31,2002

NOTE A--BASIS OF PRESENTATION

The accompanying condensed consolidated interim financial statements have been
prepared by CTS Corporation ("CTS" or "the Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The consolidated interim
financial statements should be read in conjunction with the financial
statements, notes thereto and other information included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001.

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

Certain reclassifications have been made for the periods presented in the
financial statements to conform to the classifications adopted in 2002.


NOTE B--INVENTORIES

The components of inventory consist of the following:

                                          ($ in thousands)

                                     March 31,      December 31,
                                        2002            2001
                                     --------       -----------
             Finished goods           $17,072           $19,660
             Work-in-process            8,169             8,747
             Raw materials             18,480            21,742
                                      -------           -------
                                      $43,721           $50,149
                                      =======           =======


NOTE C--RESTRUCTURING AND IMPAIRMENT CHARGES

In 2001, CTS recorded $40.0 million of pre-tax restructuring and impairment
charges, $14.0 million in the second quarter and $26.0 million in the fourth
quarter. The restructuring plan actions were designed to enable the Company to
operate more efficiently in the then existing environment and, at the same time,
position the Company for success when the economy improves. Major

                                     Page 7


<PAGE>

Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE C--RESTRUCTURING AND IMPAIRMENT CHARGES (Cont'd)

actions under the restructuring plan include closing its Chung-Li, Taiwan,
facility in the fourth quarter of 2001 and a decision to dispose of its Longtan,
Taiwan, building. The plan also covers ceasing production at its Sandwich,
Illinois; and Carlisle, Pennsylvania, facilities in the second quarter of 2002
and discontinuing the manufacture of intermediate frequency surface acoustical
wave ("IF SAW") filters. IF SAW filter production was stopped at the end of the
second quarter of 2001. Amounts included in the Condensed Consolidated Statement
of Earnings (Loss) relating to the manufacture of IF SAW filters were
insignificant in 2001. The restructuring plan provides that production formerly
completed at its Chung-Li, Taiwan; Sandwich, Illinois; and Carlisle,
Pennsylvania, facilities be transferred to other existing CTS manufacturing
locations. CTS completed a substantial portion of these consolidations and
transfers in fiscal 2001 and the remainder are expected to be completed during
the summer of 2002.

The following table displays the restructuring activity and restructuring
reserve balances as of December 31, 2001 and March 31, 2002:

                                           Workforce       Other
                                           Reductions    Exit Costs       Total
                                           ----------    ----------       -----
                                                      ($ in millions)
   Second quarter charge                     $6.4            $2.0          $8.4
   Fourth quarter charge                      3.2             0.4           3.6
                                              ---             ---           ---
   Total 2001 restructuring charge            9.6             2.4          12.0
   Items paid in 2001                        (6.8)           (1.4)         (8.2)
                                             ----            ----          ----
   Reserve balance at December 31, 2001       2.8             1.0           3.8
   Items paid in first quarter of 2002       (0.7)           (0.3)         (1.0)
                                             ----            ----          ----
   Reserve balance at March 31, 2002         $2.1            $0.7          $2.8
                                             ====            ====          ====


The $12.0 million restructuring charge relates to facility consolidations,
including plant closures and product consolidations. Included in this amount is
$9.6 million of severance benefits associated with the separation of
approximately 1,500 employees. Approximately 12% of the employees to be
severed are managerial employees and 88% are nonmanagement employees. As of
March 31, 2001, $7.5 million of severance benefits, relating to approximately
1,300 employees, had been paid. Of the remaining $2.4 million of other exit
costs, which consists primarily of costs associated with the closing of the
plants, $1.7 million has been paid as of March 31, 2002.

The restructuring plan also includes $31.0 million of asset impairment charges.
Approximately $26.9 million of the impairment charge is the adjustment needed to
reduce certain assets held for sale to their estimated fair value. See further
discussion in Note E, "Assets Held for Sale." An additional $1.2 million relates
to the write-off of leasehold improvements, primarily at its Chung-Li, Taiwan,


                                     Page 8

<PAGE>


Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE C--RESTRUCTURING AND IMPAIRMENT CHARGES (Cont'd)

facility. The remaining $2.9 million relates to impairment of certain intangible
assets  associated  with  obsolete  products  and  technology  acquired  in  the
acquisition  of the  Component  Products  Division  of  Motorola  (see  Note  D,
"Acquisition").

CTS also recognized pension plan curtailment gains of approximately $3.0 million
in 2001 resulting from plant closure under the restructuring plan.

During the first quarter of 2002, CTS recorded, in cost of sales, $0.8 million
of one-time charges, consisting primarily of equipment relocation and other
employee-related costs relating to restructuring activities. During the first
quarter of 2001, CTS recorded $2.1 million of employee severance in cost of
goods sold.


NOTE D--ACQUISITION

In 1999, CTS Corporation acquired certain assets and liabilities of the
Component Products Division ("CTS Wireless") of Motorola, Inc. ("Motorola").
The acquisition was accounted for under the purchase method of accounting. As
part of the purchase agreement, CTS may be obligated to pay additional amounts
in 2003 and 2004, depending upon increased sales and profitability of CTS
Wireless in 2002 and 2003. No amounts were due to Motorola in 2002 under the
calculations for 2001. The maximum remaining potential payment under the
acquisition agreement was $34.8 million at March 31, 2002.


NOTE E--ASSETS HELD FOR SALE

Assets held for sale at March 31, 2002 and at December 31, 2001, are comprised
of facilities, primarily the Longtan, Taiwan, building, and equipment that have
been removed from service and are to be disposed of pursuant to the
restructuring activities commenced in fiscal year 2001. Refer to Note C,
"Restructuring and Impairment Charges." The Company completed an assessment in
the fourth quarter of 2001 of the carrying value of its assets in light of then
existing and expected market conditions. The review highlighted certain assets
for which no production demand or use currently existed or was forecasted to
exist before economic obsolescence of the asset. In accordance with Financial
Accounting Standard Board("FASB") Financial Accounting Standard ("FAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," an impairment loss was recorded to reduce these assets to their
estimated fair value. These assets are recorded at amounts not in excess of what
management currently expects to receive upon sale, less cost of disposal.
However, the amounts the Company will ultimately realize are dependent on
numerous factors, some of which are beyond management's ability to control, and
could differ materially from the amounts currently recorded. Management cannot
determine when the sale of these assets will be completed. The assets to be
disposed of are held by both the electronic components and electronic assemblies
segments.


                                     Page 9

<PAGE>


Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE F--Intangible Assets

CTS recorded approximately $1 million and $1.6 million of intangible asset
amortization in the three month period ended March 31, 2002 and April 1, 2001,
respectively. The components of intangible assets as of March 31, 2002, include
the following:

                                         Gross                      Weighted
                                       Carrying    Accumulated       Average
     ($ in thousands)                     Amount     Amortization       Life
                                       --------    ------------     --------

     Amortized intangible assets:
        Customer Lists                  $36,405      $ (3,073)          30
        Patents                          10,319        (2,656)          10
        Technology                       12,014       (10,565)           4
        Other                               300          (241)           8
                                        -------       -------         ----
           Total                        $59,038      $(16,535)          21
                                        -------      --------         ----

     Unamortized intangible assets:
        Goodwill                            514             -
                                        -------      --------

           Total intangibles            $59,552      $(16,535)
                                        =======      ========


NOTE G--LONG-TERM DEBT

CTS' amended credit agreement included a revolving credit facility commitment
totaling $125 million, expiring in December 2003, and term loans, which expire
in December 2004, with outstanding balances of $21.7 million at March 31, 2002.

The credit agreement categorizes all debt existing on December 20, 2001, as
senior to any future debt. The debt is collaterized by substantially all U.S.
assets and a pledge of 65% of the stock of certain non-U.S. subsidiaries.
Interest rates on these borrowings fluctuate based upon LIBOR, with adjustments
based on the ratio of CTS' consolidated senior indebtedness to consolidated
earnings before interest, taxes, depreciation and amortization. CTS pays a
commitment fee that varies based on performance under certain financial
covenants applicable to the undrawn portion of the revolving credit agreement.
At March 31, 2002, that fee was 0.75 percent per annum. The credit agreement and
term loans require, among other things, that CTS maintain a minimum net worth, a
minimum fixed charge coverage ratio and a maximum leverage ratio. These
covenants could reduce the borrowing availability under the credit agreement.
Additionally, the credit agreement limits the amount allowed for dividends,
capital expenditures and acquisitions and requires the proceeds of all asset
sales be applied against outstanding borrowings. Furthermore, it requires
repayment in an amount of 90% of excess cash flow, as defined therein.


NOTE H--BUSINESS SEGMENTS

FAS No. 131, "Disclosures about Segments of an Enterprise and Related

                                     Page 10

<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE H--BUSINESS SEGMENTS (Cont'd)

Information," requires companies to provide certain information about their
operating segments. CTS has two reportable segments: electronic components and
electronic assemblies. Electronic components are products which perform the
basic level electronic function for a given product family for use in customer
assemblies. Electronic components consist principally of wireless components
used in cellular handsets; automotive sensors used in commercial or consumer
vehicles; quartz crystals and oscillators, and ClearONETM terminators used in
the communications and computer markets; and resistor networks, switches and
potentiometers used to serve multiple markets. Electronic assemblies are
assemblies of electronic or electronic and mechanical products which, apart from
the assembly, may themselves be marketed as separate stand-alone products. Such
assemblies represent completed, higher-level functional products to be used in
customer-end products or assemblies. These products consist principally of
integrated interconnect products containing backpanel and connector assemblies
used in the computer and communications infrastructure markets, RF (radio
frequency) integrated modules used in cellular handsets, low temperature cofired
ceramics ("LTCC") for global positioning systems ("GPS") and Bluetooth
communications products and pointing sticks/cursor controls for notebook
computers.

Management  evaluates  performance based upon segment operating  earnings before
interest and income taxes.  Summarized  financial  information  concerning  CTS'
reportable segments is shown in the following table:

  ($ in thousands)                     Electronic    Electronic
                                       Components    Assemblies     Total
                                       ----------    ----------     -----
  First Quarter 2002
  Net sales to external customers       $ 58,245     $ 54,348     $112,593
  Segment operating earnings (loss)     $ (2,542)    $  3,552     $  1,010
  Total assets                          $454,708     $ 96,098     $550,806

  First Quarter 2001
  Net sales to external customers       $ 99,865     $ 77,123     $176,988
  Segment operating earnings            $  6,467     $  1,398     $  7,865
  Total assets                          $509,892     $136,221     $646,113

Reconciling information between reportable segments and CTS' consolidated totals
is shown in the following table:

  ($ in thousands)                               First Quarter   First Quarter
                                                   2002            2001
                                               -------------   -------------

  Total segment operating earnings                $1,010         $ 7,865
  Restructuring related one-time charges -
   Electronic Components                            (703)         (2,100)
  Restructuring related one-time charges -
   Electronic Assemblies                             (79)             --
  Interest expense                                (2,670)         (3,366)
  Other expense                                      (92)           (136)
                                                 -------         -------
  Earnings (loss) before income taxes            $(2,534)        $ 2,263
                                                 =======         =======




                                     Page 11


<PAGE>


Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE I--CONTINGENCIES

Certain processes in the manufacture of CTS' current and past products create
hazardous waste by-products as currently defined by federal and state laws and
regulations. CTS has been notified by the U.S. Environmental Protection Agency,
state environmental agencies and, in some cases, generator groups, that it is or
may be a Potentially Responsible Party ("PRP") regarding hazardous waste
remediation at several non-CTS sites. In addition to these non-CTS sites, CTS
has an ongoing practice of providing reserves for probable remediation
activities at certain of its manufacturing locations and for claims and
proceedings against CTS with respect to other environmental matters. In the
opinion of management, based upon presently available information relating to
all such matters, either adequate provision for probable costs has been made, or
the ultimate costs resulting will not materially affect the consolidated
financial position, results of operations or cash flows of CTS.

Certain claims are pending against CTS with respect to matters arising out of
the ordinary conduct of its business and contracts relating to sales of
property. In the opinion of management, based upon presently available
information, either adequate provision for anticipated costs has been made by
insurance, accruals or otherwise, or the ultimate anticipated costs resulting
will not materially affect CTS' consolidated financial position, results of
operations or cash flows.


NOTE J--EARNINGS PER SHARE

FAS No. 128, "Earnings per Share," requires companies to provide a
reconciliation of the numerator and denominator of the basic and diluted
earnings per share ("EPS") computations. The calculation below provides net
earnings, average common shares outstanding and the resultant earnings per share
for both basic and diluted EPS for the first quarter of 2001. At April 1, 2001,
the other dilutive securities include approximately 255,000 shares, of CTS
common stock to be issued to DCA shareholders who have not yet tendered their
stock certificates for exchange. Approximately 319,000 common stock equivalents,
including 155,000 shares of CTS common stock to be issued to DCA shareholders,
were excluded from the computation of diluted loss per share as of March 31,
2002, due to their anti-dilutive effect.


(In thousands, except per share amounts)
                                                                      Shares
                                     Net Earnings   (in thousands)  Net Earnings
                                     (Numerator)    (Denominator)    Per Share
                                     -----------    -------------   ----------

    First Quarter 2001:
    Basic EPS                          $1,697            27,671        $0.06
    Effect of Dilutive Securities
       Stock Options                                        715
       Other                                                364
                                       ------            ------        -----

    Diluted EPS                        $1,697            28,750        $0.06
                                       ======            ======        =====





                                    Page 12



<PAGE>




Part 1 -- FINANCIAL INFORMATION (Cont'd)

NOTE K--RECENT ACCOUNTING PRONOUNCEMENTS

In 2001, the FASB issued  standards No. 141,  "Business  Combinations,"  and No.
142,  "Goodwill  and Other  Intangible  Assets." FAS No. 141  requires  business
combinations  initiated  after June 30, 2001 be accounted for using the purchase
method of accounting.  It also specifies the types of acquired intangible assets
that are required to be recognized and reported  separately  from goodwill.  FAS
No. 142 requires  goodwill and certain  intangibles no longer be amortized,  but
instead  be tested  for  impairment  at least  annually.  The FASB  also  issued
standard  No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets."  FAS No. 144 defines  impairment  for  long-lived  assets and  provides
guidance on the measurement of asset impairments. CTS had no transitional effect
of adopting these statements at January 1, 2002.


NOTE L--SUBSEQUENT EVENTS

On April 16, 2002, CTS amended its credit agreement with its existing nine
banks. The amended agreement adjusts certain financial covenants, reduces the
revolving credit facility to $115 million and allows for limited acquisitions.

Also on April 16, 2002, the Company issued $25 million of five-year, 6.5%
convertible, subordinated debentures. These debentures are unsecured and convert
into CTS common stock at a conversion price of $20.05 per share. The Company has
granted the initial purchasers of the debentures a 90-day option to purchase an
additional $5.0 million aggregate principal amount of the debentures. At any
time after the three-year anniversary of the issue date, the purchasers may
accelerate the maturity of the debentures. CTS also has the right after such
three-year anniversary and under certain circumstances, to force conversion of
the debentures into common stock. CTS used the net proceeds from the offering to
repay the outstanding term loans in full under its existing credit facility,
and the balance was applied to its revolving credit facility.

















                                     Page 13


<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)

Results of Operations

The following table highlights changes in significant components of the
consolidated statements of earnings for the three-month periods ended March 31,
2002 and April 1, 2001.

                                                  ($ in thousands)

                                        March 31,        April 1,    Increase
                                            2002            2001    (Decrease)
                                        --------         -------    ----------
     Net sales                          $112,593        $176,988     $(64,395)
     Gross profit                         22,678          40,565      (17,887)
     Gross profit as a percent
      of sales                              20.1%          22.9%        (2.8%)
     Selling, general and
      administrative expenses             15,317          25,020       (9,703)
     Selling, general and
      administrative expenses as
      a percent of sales                    13.6%          14.1%        (0.5%)
     Research and development
      expenses                             7,133           9,780       (2,647)
     Operating earnings                      228           5,765       (5,537)
     Operating earnings, as a
      percent of sales                       0.2%           3.3%         (3.1%)
     Interest expense                      2,670           3,366         (696)
     Earnings (loss) before income
      taxes                               (2,534)          2,263       (4,797)
     Income tax expense (benefit)           (633)            566       (1,199)
     Income tax rate                        25.0%          25.0%           --
     Net earnings (loss)                 $(1,901)         $1,697      $(3,598)


Net sales decreased by $64.4 million, or 36% from the first quarter of 2001.
Gross profit is lower due primarily to the lower absorption of fixed
manufacturing overhead expenses. Gross profit and operating earnings include
$0.8 million and $2.1 million of restructuring-related, one-time charges in the
first quarter of 2002 and 2001, respectively.

As a percentage of total sales, the first quarter of 2002 sales of electronic
components and electronic assemblies were 52% and 48%, respectively. As a
percentage of total sales, sales of electronic components and electronic
assemblies in the first quarter of 2001 were 56% and 44%, respectively.
Refer to Note H, "Business Segments," for a description of the Company's
business segments.

The electronic components segment experienced a $41.6 million sales decrease, or
42% from the first quarter of 2001. Sales decreases occurred principally as a
result of the softness in demand for wireless handset and infrastructure
components.




                                     Page 14

<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations (Cont'd)

The electronic assemblies segment experienced a 2002 sales decrease of $22.8
million, or 30% from the first quarter of 2001. The revenue decrease was
experienced primarily as a result of lower demand for integrated interconnect
systems products for the data storage systems for the computer equipment market,
and the continued softness in the wireless handset market.

Gross profit decreased primarily due to lower sales levels. The lower percent of
sales in both segments results principally from lower absorption of fixed
manufacturing overhead expenses caused by lower production levels combined with
a shift of sales to lower margin products. Gross profit in the first quarter of
2002 also includes $3.1 million of a customer reimbursement for expenses
substantially incurred in prior quarters.

Selling, general and administrative expenses were $15.3 million, versus $25.0
million in the prior year's quarter. The reduction was primarily due to 2001
restructuring actions and cost reduction programs and lower sales related
expenses.

Research and development expenses decreased $2.7 million to $7.1 million from
the first quarter of 2001. However, as a percent of sales, research and
development expense increased to 6.3% in the first quarter of 2002 up from 5.5%
in the first quarter of 2001. Significant ongoing R&D activities continue in our
wireless, automotive and resistor product lines to support current product and
process enhancements, expanded applications and new product development.

The decrease in operating earnings dollars, was principally due to lower volume
as a result of the overall softness in the served markets, particularly the
wireless handset demand within both the electronic components and electronic
assemblies segments.

During 2001, CTS announced a restructuring plan designed to size the Company to
then-existing market realities, while continuing to put a priority on
positioning the Company to be successful as the economy recovers and market
growth returns.  See Note C, "Restructuring and Impairment Charges," for a
more detailed explanation of the plan actions. The expected pre-tax
profitability improvement associated with the 2001 restructuring and asset
impairment charges is estimated to be $15 million.

Liquidity and Capital Resources

The following table highlights changes in balance sheet items and ratios and
other information related to liquidity and capital resources:

                                            ($ in thousands)

                                     March 31,   December 31,  Increase
                                        2002         2001     (Decrease)
                                        ----         ----     ----------
    Cash                             $  7,672     $ 13,255     $(5,583)
    Accounts receivable, net           80,068       81,563      (1,495)
    Inventories, net                   43,721       50,149      (6,428)
    Current assets                    187,409      200,674     (13,265)
    Accounts payable                   48,826       50,842      (2,016)
    Current portion of debt            13,911       27,500     (13,589)
    Current liabilities               126,953      153,857     (26,904)
    Working capital                    60,456       46,817      13,639
    Current ratio                         1.5          1.3         0.2
    Long-term debt (including
     current maturities)              118,708      152,513     (33,805)
    Shareholders' equity              271,028      242,873      28,155
    Long-term debt (including
     current maturities) as a
     percent of shareholders'
     equity                               44%          63%        (19%)
    Long-term debt (including
     current maturities) as a
     percent of capitalization            30%          39%        (9%)




                                     Page 15

<PAGE>



Part 1 -- FINANCIAL INFORMATION (Cont'd)

Item 2.   Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)

The percentage of long-term debt to shareholders' equity decreased to 44% on
March 31, 2002, versus 63% on December 31, 2001, due to the repayment of debt
primarily with the proceeds from the issuance of common stock.

From December 31, 2001, to March 31, 2002, CTS' working capital increased $13.6
million. This increase is primarily attributable to the reduction in the current
portion of borrowings at March 31, 2002, compared with December 31, 2001, of
$13.6 million. The reductions in cash, accounts receivable and inventory were
offset by reductions in accounts payable and accruals.

Capital expenditures were $4.7 million during the first quarter, compared with
$32.1 million for first quarter 2001. The 2002 capital expenditures were
primarily for production equipment for new products.

In the first quarter of 2002, cash flows provided by operating activities were
$0.7 million. Depreciation and amortization were nearly offset by net working
capital reductions and the net loss for the quarter. In the first quarter of
2001, cash flows provided by operating activities were $3.8 million.

Cash flows used for investing activities totaled $4.5 million through the first
quarter of 2002, including $4.7 million of capital expenditures. In the first
quarter of 2001, cash flows used for investing activities totaled $32.3 million,
consisting of $32.1 million of capital expenditures.

Cash flows used by financing activities were $1.6 million in 2002 consisting
primarily of proceeds from the issuance of debt of $31.6 million offset by a net
repayment of debt of $32.4 million and dividend payments of $0.9 million.

Cash flows provided by financing activities were $22.2 million in 2001,
consisting primarily of a net increase in debt of $21.5 million, partially
offset by payment of dividends of $0.8 million.

CTS' capital expenditures for 2002 are presently expected to total less than $35
million, $4.7 million of which has been spent during the first three months of
the year. These capital expenditures are primarily for new products and cost
savings initiatives.

On April 16, 2002, CTS amended its credit agreement with its existing nine
banks. The amended agreement adjusts certain financial covenants, reduces the
revolving credit facility to $115 million and allows for limited acquisitions.
The agreement includes the revolving credit facility commitment, expiring in
December 2003, and term loans, which expire in December 2004, with outstanding
balances of $21.7 million at March 31, 2002.






                                     Page 16


<PAGE>


Part 1 -- FINANCIAL INFORMATION (Cont'd)

Item 2.   Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)

These debt agreements contain financial covenants as described in Note F,
"Long-term Debt." Although CTS management currently expects to be in compliance
with all financial covenants, there can be no assurance of this. Certain
factors, such as forecasted future operating results, are dependent upon future
events, some of which are beyond CTS' ability to control.

CTS believes cash flows from operations and borrowings under its credit
agreement will be adequate to fund its working capital, restructuring
activities, capital expenditures and debt service requirements. However, if
customer demand decreases significantly from CTS' current forecast, CTS may need
to find an alternative funding source. In this event, CTS may choose to pursue
additional equity and/or debt financing. CTS cannot assure that additional
financing, which would be affected by general economic and market conditions,
would be available on terms acceptable to CTS or at all.

During 2002, CTS is required to repay $27.5 million term loans under its credit
agreement, $15.0 million of which had been paid as of March 31, 2002, and to
make $5.9 million of lease payments. CTS has historically been able to fund it
capital and operating needs through its cash flows from operations and available
credit under its bank credit facilities.

On December 14, 1999, CTS' shelf registration statement on Form S-3 was declared
effective by the Securities and Exchange Commission. CTS could initially offer
up to $500.0 million in any combination of debt securities, common stock,
preferred stock or warrants under the registration statement. During the first
quarter of 2002, CTS issued $28.2 million of common stock under this
registration statement and received net proceeds of $28.1 million. CTS used the
net proceeds of these equity issuances to repay term loans under its credit
agreement. As of March 31, 2002, CTS could offer up to $445.8 million of
additional debt and/or equity securities under this registration statement.

Also on April 16, 2002, the Company issued $25 million of five-year, 6.5%
convertible, subordinated debentures. These debentures are unsecured and convert
into CTS common stock at a conversion price of $20.05 per share. The Company has
granted the initial purchasers of the debentures a 90-day option to purchase an
additional $5.0 million aggregate principal amount of the debentures. At any
time after the three-year anniversary of the issue date, the purchasers may
accelerate the maturity of the debentures. CTS also has the right after such
three-year anniversary and under certain circumstances, to force conversion of
the debentures into common stock. CTS used the net proceeds from the offering to
repay the outstanding term loans in full under its existing credit facility, and
the balance was applied to its revolving credit facility.








                                     Page 17

<PAGE>




Part 1 -- FINANCIAL INFORMATION (Cont'd)


                                      *****

Statements about the Company's earnings outlook and its plans, estimates and
beliefs concerning the future are forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995, based on the Company's
current expectations. Actual results may differ materially from those stated in
the forward-looking statements due to a variety of factors which could affect
the Company's operating results, liquidity and financial condition. We undertake
no obligations to publicly update or revise any forward-looking statements.
Factors that could impact future results include among others: the general
market conditions in the communications, computer and automotive markets, and in
the overall economy; whether the Company is able to implement measures to
improve its financial condition and flexibility; the Company's successful
execution of its restructuring, consolidation and cost-reduction plans; pricing
pressures and demand for the Company's products, especially if economic
conditions worsen or do not recover in the key markets for the Company's
products; and risks associated with our international operations, including
trade and tariff barriers, exchange rates and political risks. Investors are
encouraged to examine the Company's SEC filings, which more fully describe the
risks and uncertainties associated with the Company's business.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in CTS' market risk since December 31, 2001.

Part 2 -- OTHER INFORMATION

Item 1.  Legal Proceedings

CTS is involved in litigation and in other administrative proceedings with
government agencies regarding the protection of the environment, and other
matters, the results of which are not yet determinable. In the opinion of
management, based upon currently available information, adequate provision for
anticipated costs has been made, or the ultimate costs resulting from such
litigation or administrative proceedings will not materially affect the
consolidated financial position, results of operations or cash flows of CTS. See
also Note I, "Contingencies," in the financial statements.


Item 6.  Exhibits and Reports on Form 8-K

a.   Exhibits

(10) (a) The First Amendment to Third Amended and Restated Credit Agreement





                                     Page 18


<PAGE>



Part 2 -- OTHER INFORMATION (Cont'd)

Item 6.  Exhibits and Reports on Form 8-K (Cont'd)

b.    Reports on Form 8-K

During the three-month period ending March 31, 2002, CTS filed the following
reports on Form 8-K:

o    Report dated February 1, 2002, under Item 5., Other Events, announcing
     a press release containing its financial results and other data for the
     year and quarter ended December 31, 2001.

o    Report dated February 5, 2002, under Item 5., Other Events, disclosing
     the issuance of 1,000,000 shares of its Common Stock to an institutional
     investor pursuant to a previously filed shelf registration statement on
     Form S-3. The Form 8-K also filed the opinion of counsel related to this
     transaction.

o    Report dated February 7, 2002, under Item 5., Other Events, presenting the
     December 31, 2001 balance sheet.

o    Report dated March 1, 2002, under Item 5., Other Events, disclosing
     the issuance of 1,000,000 shares of its Common Stock to an institutional
     investor pursuant to a previously filed shelf registration statement on
     Form S-3. The Form 8-K also filed the opinion of counsel related to this
     transaction.


                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


CTS CORPORATION                 CTS CORPORATION




/S/Richard G. Cutter            /S/Vinod M. Khilnani
- ------------------------        ----------------------------
Vice President, Secretary       Senior Vice President and
and General Counsel             Chief Financial Officer



Dated: April 30, 2002







                                     Page 19

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>3
<FILENAME>exhibit1stq10q.txt
<TEXT>
                                                                EXECUTION COPY


                                 FIRST AMENDMENT
                                       to
                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                  THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT ("Amendment") is made as of April 15, 2002 by and among CTS
Corporation, an Indiana corporation (the "Borrower"), the financial institutions
listed on the signature pages hereof (the "Lenders") and Bank One, NA, having
its principal place of business in Chicago, Illinois, as contractual
representative (the "Agent"), under that certain Third Amended and Restated
Credit Agreement dated as of December 20, 2001 by and among the Borrower, the
Lenders, the Agent, ABN AMRO Bank N.V., as documentation agent and Harris Trust
and Savings Bank, as syndication agent (the "Credit Agreement"). Capitalized
terms used but not otherwise defined herein shall have the respective meanings
given to them in the Credit Agreement.

        WHEREAS, the Borrower, the Lenders and the Agent are parties
to the Credit Agreement;

        WHEREAS,  the Borrower has requested that the Required Lenders consent
to certain amendments to the Credit Agreement;

and

        WHEREAS, the Lenders and the Agent have agreed to amend the Credit
Agreement on the terms and conditions set forth herein;

        WHEREAS, the Borrower, the Lenders and the Agent have further
agreed to reduce the Aggregate Revolving Loan Commitment as provided in Section
8 below;

        NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, the Lenders and the Agent have agreed to the following amendment to
the Credit Agreement.

1.      Amendments.  Effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 2 below, the
Credit Agreement is hereby amended as follows:

(a)     Section 1.1 of the Credit Agreement is hereby amended to add the
following new defined terms in the appropriate alphabetical locations:

                  "Subordinated Note Documents" means (i) the Subordinated
Notes, (ii) the Subordinated Note Purchase Agreement and (iii) any other
"Transaction Documents" (under and as defined in the Subordinated Note Purchase
Agreement) or other agreements, documents or instruments executed and/or

<PAGE>



delivered in connection with the Subordinated Notes in form and substance
acceptable to the Agent and as the same may be amended, supplemented or modified
in accordance with Section 7.2(M) hereof (including, without limitation, the
Registration Rights Agreement substantially in the form of the draft dated April
9, 2002 distributed to the Lenders, with such changes thereto as may be
acceptable to the Agent).

                  "Subordinated Noteholders" means the "Purchasers" party to the
Subordinated Note Purchase Agreement and each of their respective successors and
permitted assigns, as the "Holders" of the Subordinated Notes.

                  "Subordinated Note Purchase Agreement" means that certain
Securities Purchase Agreement dated on or before April 25, 2002 between the
Borrower and each of the Subordinated Noteholders parties thereto, substantially
in the form of the draft dated April 9, 2002 distributed to the Lenders (with
such changes thereto as may be acceptable to the Agent) and as the same may be
amended, supplemented or modified in accordance with Section 7.2(M) hereof.

                  "Subordinated Notes" means those certain five-year 6 1/2%
Convertible Debentures to be issued by the Borrower in an original aggregate
principal amount of $25,000,000 (which may be increased by up to an additional
$5,000,000 within approximately ninety (90) days after the original issuance
thereof) and purchased by the Subordinated Noteholders pursuant to the
Subordinated Note Purchase Agreement, substantially in the form of the draft
dated April 9, 2002 distributed to the Lenders (with such changes thereto as may
be acceptable to the Agent) and as the same may be amended, supplemented or
modified in accordance with Section 7.2(M) hereof.

(b)      The definition of "Change of Control" in Section 1.1 of the Credit
Agreement is hereby restated in its entirety as follows:

                  "Change of Control" means

                  (I) an event or series of events by which:

                           (a) any Person together with Affiliates of such
                  Person is or becomes the "beneficial owner" (as defined in
                  Rule 13d-3 under the Securities Exchange Act of 1934),
                  directly or indirectly, of twenty percent (20%) of the
                  combined voting power of the Borrower's outstanding Capital
                  Stock ordinarily having the right to vote at an election of
                  directors; or

                           (b) during any period of twelve (12) consecutive
                   calendar months, individuals:

                           (i)      who were directors of the Borrower on the
                                    first day of such period, or

                           (ii)     whose election or nomination for
                                    election to the board of directors of the
                                    Borrower was recommended or approved by at
                                    least a majority of the directors then still
                                    in office who were directors of the Borrower
                                    on the first day of such period, or whose
                                    election or nomination for election was so
                                    approved, shall cease to constitute a
                                    majority of the board of directors of the
                                    Borrower; or


<PAGE>

                  (II) any "Change of Control Transaction" or event of like
import under and as defined in the Subordinated Notes.

(c)  The definition of "EBITDA" in Section 1.1 of the Credit Agreement is
hereby amended to add the following proviso immediately before the period at the
end thereof:

         provided, that upon the consummation of any Acquisition permitted
         hereunder, for calculations made from and after such Acquisition,
         EBITDA shall be calculated on a pro forma basis including the target's
         historical EBITDA for the applicable period using historical financial
         statements obtained from the seller broken down by fiscal quarter in
         the Borrower's reasonable judgment (the amounts from which shall be
         unadjusted unless adjustments thereto have been approved in writing by
         the Agent)

(d)  The definition of "Indebtedness" in Section 1.1 of the Credit
Agreement is hereby amended to delete clause (i) in its entirety and to
substitute the following clause (i) therefor:

         (i) Off-Balance Sheet Liabilities (excluding liabilities under those
         certain operating leases of equipment and aircraft sold by the Borrower
         prior to December 31, 2001 for an aggregate amount of approximately
         $15,000,000);

(e) Section 2.5(B)(i)(e)(III) of the Credit Agreement is hereby restated in its
entirety as follows:

                  (III) following the payment in full of the Term Loans and the
         Supplemental Syndicated Loans, the amount of each Designated Prepayment
         shall be applied to repay Revolving Loans (without reducing the
         Revolving Loan Commitments).

(f)      Article VI of the Credit Agreement is hereby amended to add the
following new Section 6.17 thereto:

                  6.17 Subordinated Indebtedness. The subordination provisions
         of the Subordinated Note Documents and each of the Subordinated Notes
         are enforceable against the Subordinated Noteholders and the
         Obligations constitute "Senior Debt" (or an appropriate equivalent
         term) under and as defined in the Subordinated Note Documents and each
         of the Subordinated Notes.

(g)      Section 7.2(A) of the Credit Agreement is hereby amended to delete
the word "and" at the end of clause (iv) thereof and to add the following
language immediately after clause (vi) thereof:

         ; and

         (vii)    Indebtedness evidenced by the Subordinated Note Documents.

(h)      Section 7.2(C) of the Credit Agreement is hereby restated in its
entirety as follows:

<PAGE>

         (C)      Merger; Acquisitions; Etc. Purchase or otherwise acquire,
whether in one or a series of transactions, all or a substantial portion of the
business assets, rights, revenues or property, real, personal or mixed, tangible
or intangible, of any Person, or all or a substantial portion of the Capital
Stock of or other Equity Interest in any other Person, or merge or consolidate
or amalgamate with any other Person or take any other action having a similar
effect, nor enter into any joint venture or similar arrangement with any other
Person other than an Acquisition which has been approved by the Required Lenders
and otherwise meets the following requirements (except as may be waived by the
Required Lenders):

         (a)      no Default or Event of Default shall have occurred and be
continuing  or would result from such  Acquisition  or the incurrence of any
Indebtedness in connection therewith;

         (b)      the purchase is consummated pursuant to a negotiated
                  acquisition agreement on a non-hostile basis and approved by
                  the target company's board of directors (and shareholders, if
                  necessary) prior to the consummation of the Acquisition; and
                  (i) the acquisition documents in respect of such purchase (x)
                  shall have been delivered to the Agent in substantially final
                  form, reasonably in advance of the consummation of the
                  proposed Acquisition to provide the Agent sufficient time to
                  review such documents and (x) are reasonably satisfactory to
                  the Agent (including, without limitation, in respect of
                  representations, indemnities and opinions) and (ii) the
                  results of due diligence in respect of such purchase are
                  reasonably satisfactory to the Agent;

         (c)      the purchase price for all such Acquisitions permitted
                  under this Section 7.3(C) shall not exceed $15,000,000 during
                  the term of this Agreement (including the incurrence or
                  assumption of any Indebtedness in connection therewith and
                  transaction-related contractual payments, including the
                  maximum amounts payable as Contingent Purchase Price
                  Obligations);

         (d)      in the case of an Acquisition of Capital Stock of an
                  entity, the Acquisition shall be of at least ninety percent
                  (90%) of the Capital Stock of such entity, and such acquired
                  entity shall be (x) merged with and into the Borrower or any
                  wholly-owned Subsidiary thereof within ten (10) Business Days
                  following such Acquisition, with the Borrower or such
                  wholly-owned Subsidiary being the surviving corporation
                  following such merger or (y) the results of operations of such
                  entity shall be reported on a consolidated basis with the
                  Borrower and its consolidated Subsidiaries;

         (e)      the Borrower and its Subsidiaries shall have complied
                  with all of the requirements of the Collateral Documents and,
                  to the extent applicable, Sections 7.1(F) and (G) hereof in
                  respect of such Acquisition;

         (f)      the business  being  acquired  shall be  substantially
                  similar,  related or incidental to the business or activities
                  engaged in by the Borrower and its Subsidiaries on the
                  Effective Date; and

<PAGE>


         (g)      prior to such Acquisition, the Borrower shall deliver to the
                  Agent and the Lenders a certificate from one of the Authorized
                  Officers, demonstrating to the satisfaction of the Agent that
                  after giving effect to such Acquisition and the incurrence of
                  any Indebtedness permitted by Section 7.2(A) in connection
                  therewith, on a pro forma basis using historical financial
                  statements obtained from the seller broken down by fiscal
                  quarter in the Borrower's reasonable judgment (the amounts
                  from which shall be unadjusted unless adjustments thereto have
                  been approved in writing by the Agent) in respect of such
                  Acquisition as if the Acquisition and such incurrence of
                  Indebtedness had occurred on the first day of the twelve-month
                  period ending on the last day of the Borrower's most recently
                  completed fiscal quarter, the Borrower would have been in
                  compliance with the financial covenants in Section 7.3.

(i)      Section 7.2(J) of the Credit Agreement is hereby restated in its
         entirety as follows:

                  (J) Restricted Payments. Declare or make any Restricted
         Payment; provided, however, that (i) the Borrower may pay quarterly
         dividends at a rate not in excess of the declared value per share
         announced by the Borrower on December 7, 2001 and (ii) the Borrower may
         issue "Permitted Junior Securities" under and as defined in the
         Subordinated Note Purchase Agreement to the extent permitted
         thereunder.

(j)      The Credit Agreement is hereby amended to add the following new Section
         7.2(M) thereto:

                  (M) Other Indebtedness. The Borrower shall not amend, modify
         or supplement, or permit any Subsidiary to amend, modify or supplement
         (or consent to any amendment, modification or supplement of), any
         document, agreement or instrument evidencing the Subordinated Notes or
         any replacements, substitutions or renewals thereof (including, without
         limitation, the Subordinated Note Documents) where such amendment,
         modification or supplement provides for the following or which has any
         of the following effects:

(i)  increases  the  overall  principal  amount  of the  Subordinated  Notes  or
     increases the amount of any single  scheduled  installment  of principal or
     interest;

(ii) shortens or accelerates the date upon which any installment of principal or
     interest   becomes  due  or  adds  any  additional   mandatory   redemption
     provisions;

(iii) shortens  the  final  maturity  date  of the  Subordinated  Notes  or
      otherwise  accelerates  the  amortization  schedule  with  respect  to the
      Subordinated Notes;

(iv) increases the rate of interest accruing on the Subordinated Notes;

(v)  provides for the payment of additional fees or increases existing fees;

<PAGE>


(vi) amends or modifies any  financial or negative  covenant (or covenant  which
     prohibits  or restricts  the  Borrower or a Subsidiary  thereof from taking
     certain  actions) in a manner which is more onerous or more  restrictive in
     any material  respect to the Borrower (or any  Subsidiary  of the Borrower)
     than the  financial  or  negative  covenants  contained  herein or which is
     otherwise  materially adverse to the Borrower and/or the Lenders or, in the
     case of adding covenants,  which places material additional restrictions on
     the  Borrower  (or a  Subsidiary  of the  Borrower)  or which  requires the
     Borrower or any such Subsidiary to comply with more  restrictive  financial
     ratios or which  requires the Borrower to better its financial  performance
     from that set forth in the existing financial covenants;

(vii) amends,  modifies or adds any affirmative  covenant in a manner which,
      when taken as a whole,  is  materially  adverse to the Borrower and/or the
      Lenders; or

(viii) amends,  modifies,  suspends or supplements the subordination  provisions
       thereof.

(k)      Section 7.3(B) of the Credit Agreement is hereby restated in its
         entirety as follows:

                  (B) Leverage Ratios. (i) The Borrower and its Subsidiaries on
         a consolidated basis shall not permit the ratio (the "Total Leverage
         Ratio") of (i) Total Debt to (ii) EBITDA to be greater than the ratio
         set forth below at the end of the fiscal quarter ending on the
         corresponding date set forth below:

         Quarter Ending                      Total Leverage Ratio
         --------------                      --------------------

         December 31, 2001                   6.50 to 1.00

         March 31, 2002                      5.50 to 1.00
         June 30, 2002                       5.50 to 1.00
         September 30, 2002                  4.75 to 1.00
         December 31, 2002                   3.25 to 1.00

         March 31, 2003                      3.25 to 1.00
         June 30, 2003                       2.75 to 1.00
         September 30, 2003 and each         2.50 to 1.00
         quarter thereafter

<PAGE>


                  (ii) The Borrower and its Subsidiaries on a consolidated basis
         shall not permit the ratio (the "Senior Leverage Ratio") of (i) Senior
         Debt to (ii) EBITDA to be greater than the ratio set forth below at the
         end of the fiscal quarter ending on the corresponding date set forth
         below or on such other corresponding date set forth below:

         Quarter or Date Ending              Senior Leverage Ratio
         ----------------------              ---------------------

         December 31, 2001                   6.50 to 1.00

         April 25, 2002                      4.50 to 1.00
         June 30, 2002                       4.50 to 1.00
         September 30, 2002                  3.75 to 1.00
         December 31, 2002                   2.50 to 1.00

         March 31, 2003                      2.00 to 1.00
         June 30, 2003 and each              1.50 to 1.00
         quarter thereafter

                  The Total Leverage Ratio and, in the case of each fiscal
         quarter other than the fiscal quarter ending March 31, 2002, the Senior
         Leverage Ratio, shall be determined as of the last day of each fiscal
         quarter based upon (i) Total Debt or Senior Debt, as the case may be,
         as of the last day of such fiscal quarter and (ii) EBITDA for the four
         fiscal quarter period ending on such day. With respect to the fiscal
         quarter ending March 31, 2002, the Senior Leverage Ratio shall be
         determined as of April 25, 2002 based upon (i) Senior Debt as of April
         25, 2002 and (ii) EBITDA for the four fiscal quarter period ending on
         the last day of the fiscal quarter ending March 31, 2002.

(l)      Section 7.4 of the Credit Agreement is hereby restated in its entirety
         as follows:

                  7.4  Sale and Leaseback Transactions and Other
         Off-Balance Sheet Liabilities. The Borrower will not, nor will it
         permit any Subsidiary to, enter into or suffer to exist any (i) Sale
         and Leaseback Transaction or (ii) any other transaction pursuant to
         which it incurs or has incurred Off-Balance Sheet Liabilities, except
         for (x) Interest Rate Agreements permitted to be incurred under the
         terms of Section 7.2(K) hereof and (y) the Sale and Leaseback
         Transactions with respect to those certain operating leases of
         equipment and aircraft sold by the Borrower prior to December 31, 2001
         for an aggregate amount of approximately $15,000,000.

(m)      Section 8.1(e) of the Credit Agreement is hereby restated in its
         entirety as follows:

                  (e) Default as to Other Indebtedness; Subordinated Notes.

                  (i) The Borrower or any of its Subsidiaries shall fail
         to make any payment when due (whether by scheduled maturity, required
         prepayment, acceleration, demand or otherwise) with respect to any
         Indebtedness (other than the Subordinated Notes, which are addressed in
         clause (ii) below, and other than the Obligations) the outstanding
         principal amount of which Indebtedness is in excess of $5,000,000; or
         any breach, default or event of default shall occur, or any other
         condition shall exist under any instrument, agreement or indenture

<PAGE>


         pertaining to any such Indebtedness, if the effect thereof is to cause
         an acceleration, mandatory redemption, a requirement that the Borrower
         offer to purchase such Indebtedness or other required repurchase of
         such Indebtedness, or permit the holder(s) of such Indebtedness to
         accelerate the maturity of any such Indebtedness or require a
         redemption or other repurchase of such Indebtedness; or any such
         Indebtedness shall be otherwise declared to be due and payable (by
         acceleration or otherwise) or required to be prepaid, redeemed or
         otherwise repurchased by the Borrower or any of its Subsidiaries (other
         than by a regularly scheduled required prepayment) prior to the stated
         maturity thereof.

                  (ii)   The Borrower or any of its Subsidiaries shall fail
         to make any payment when due (whether by scheduled maturity, required
         prepayment, acceleration, demand or otherwise) with respect to the
         Subordinated Notes or any other amounts owing under or pursuant to the
         Subordinated Note Documents; or any breach, default or event of default
         shall occur, or any other condition shall exist under any instrument,
         agreement or indenture pertaining to the Subordinated Notes (including,
         without limitation, an "Event of Default" or "Change of Control
         Transaction" under and as defined in the Subordinated Note Documents),
         if the effect thereof is to cause an acceleration, mandatory
         redemption, a requirement that the Borrower offer to purchase the
         Subordinated Notes or other required repurchase of the Subordinated
         Notes, or permit the Subordinated Noteholders to accelerate the
         maturity of the Subordinated Notes or require a redemption or other
         repurchase of the Subordinated Notes; or any amounts owing under or
         pursuant to the Subordinated Notes or any other Subordinated Note
         Document shall be otherwise declared to be due and payable (by
         acceleration or otherwise) or required to be prepaid, redeemed or
         otherwise repurchased by the Borrower or any of its Subsidiaries (other
         than by a regularly scheduled required prepayment) prior to the stated
         maturity thereof.

2.       Condition of Effectiveness.  The effectiveness of this Amendment is
subject to the condition precedent that the Agent shall have received:

(a)      counterparts of this Amendment duly executed by the Borrower, the
Required Lenders and the Agent;

(b)      counterparts of the Reaffirmation attached hereto duly executed by each
Subsidiary Guarantor;

(c)      for the account of each Lender, a fee in the amount of 20 basis
points on the sum of (i) such Lender's Revolving Loan Commitment, (ii) the
aggregate outstanding principal amount of such Lender's Supplemental Syndicated
Loans and (iii) the aggregate outstanding principal amount of such Lender's Term
Loans, in each case, determined as if the prepayment of the Term Loans from the
Net Cash Proceeds of the original issuance of Subordinated Notes in the
aggregate principal amount of $25,000,000 and the partial termination of the
Revolving Credit Commitments described in Section 8 hereto shall have occurred;
and

(d)  for the account of the Arranger, such fees as have been agreed to in
a separate letter agreement between the Arranger and the Borrower.


<PAGE>

3.       Representations and Warranties of the Borrower.  The Borrower hereby
represents and warrants as follows:

(a)  This Amendment and the Credit Agreement as modified hereby constitute
legal, valid and binding obligations of the Borrower and are enforceable against
the Borrower in accordance with their terms.

(b)  As of the date hereof and giving effect to the terms of this
Amendment, (i) there exists no Default or Unmatured Default and (ii) the
representations and warranties contained in Article VI of the Credit Agreement,
as modified hereby, are true and correct, except for changes reflecting events,
conditions or transactions permitted or not prohibited by the Credit Agreement.

4.       Reference to and Effect on the Credit Agreement and Loan Documents.

(a)  Upon the effectiveness of Section 1 hereof, each reference to the
Credit Agreement in the Credit Agreement or any other Loan Document shall mean
and be a reference to the Credit Agreement as modified hereby.

(b)  The Borrower reaffirms the terms and conditions of the Credit
Agreement and the Loan Documents executed by it, including, without limitation,
the Security Agreement, the Pledge Agreements, the Mortgages and the other
Collateral Documents, as applicable, and acknowledges and agrees that except as
specifically modified above, the Credit Agreement and all other documents,
instruments and agreements executed and/or delivered in connection therewith
shall remain in full force and effect and are hereby ratified and confirmed.

(c)  The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Agent or the Lenders, nor constitute a waiver of or
consent to any provision of the Credit Agreement or any other documents,
instruments and agreements executed and/or delivered in connection therewith.

5.   Governing Law. ANY DISPUTE BETWEEN THE BORROWER AND THE AGENT, THE
ARRANGER, ANY LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH, THIS AMENDMENT OR THE CREDIT AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.

6.       Headings.  Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

<PAGE>


7.       Counterparts.  This Amendment may be executed by one or more of the
parties hereto on any number of separate counterparts (including by means of
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

8.       Reduction of Aggregate Revolving Loan Commitment. Effective as of the
date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 2 above, the Aggregate Revolving Loan Commitment shall be
permanently reduced by $10,000,000 (the "Reduction Amount"), and, accordingly,
each Lender's Revolving Loan Commitment shall be reduced by its respective
Revolving Loan Pro Rata Share of the Reduction Amount. After giving effect to
such reduction, the Aggregate Revolving Loan Commitment will be $115,000,000.



<PAGE>



                                Signature Page to
                                 CTS Corporation
                               First Amendment to
                   Third Amended and Restated Credit Agreement



IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.

                 CTS CORPORATION,  as the Borrower


                          /s/ Vinod M. Khilnani
                 ------------------------------------------------------------
                 Name:    Vinod M. Khilnani
                 Title:   Senior Vice President and
                          Chief Financial Officer


                 BANK ONE, NA (Main Office Chicago), formerly known as NBD Bank,
                 N.A., as the Agent, as a Lender, as the Issuing Bank and as the
                 Swing Line Bank


                            /s/ Michael B. Kelly
                 ------------------------------------------------------------
                   Name:    Michael B. Kelly
                   Title:   Associate


                 ABN AMRO BANK N.V., as Documentation Agent and as a Lender


                           /s/ Lynn R. Schade
                 ------------------------------------------------------------
                   Name:   Lynn R. Schade
                   Title:  Group Vice President


                           /s/ Jana Dombrowski
                 ------------------------------------------------------------
                   Name:   Jana Dombrowski
                   Title:  Vice President


                 HARRIS TRUST AND SAVINGS BANK, as Syndication Agent and as
                 a Lender


                          /s/ Thad D. Rasche
                 ------------------------------------------------------------
                   Name:  Thad D. Rasche
                   Title: Vice President




<PAGE>




                  THE NORTHERN TRUST COMPANY, as a Lender

                            /s/ Mark E. Taylor
                  ------------------------------------------------------------
                    Name:   Mark E. Taylor
                    Title:  Vice President


                  KEYBANK NATIONAL ASSOCIATION, as a Lender


                            /s/  Mary K. Young
                  ------------------------------------------------------------
                    Name:   Mary K. Young
                    Title:  Vice President


                  NATIONAL CITY BANK OF INDIANA, as a Lender


                             /s/ Robert E. Norell Jr.
                  -----------------------------------------------------------
                    Name:    Robert E. Norell Jr.
                    Title:   Vice President


                  THE BANK OF TOKYO-MITSUBISHI, LTD., as a Lender


                           /s/ Shinchiro Munechika
                  ------------------------------------------------------------
                    Name:  Shinchiro Munechika
                    Title: Deputy General Manager


                  SUNTRUST BANK, as a Lender


                  ---------------------------------
                    Name:
                    Title:




<PAGE>




                  WACHOVIA BANK, NATIONAL ASSOCIATION (formerly known as
                  Wachovia Bank, N.A.), as a Lender


                            /s/ Donald E. Sellers, Jr.
                  ------------------------------------------------------------
                    Name:   Donald E. Sellers, Jr.
                    Title:  Director




<PAGE>



                                Signature Page to
                          CTS Corporation Reaffirmation


                                  REAFFIRMATION

                  Each of the undersigned (each, a "Guarantor") hereby
acknowledges receipt of a copy of the First Amendment dated as of April 15, 2002
(the "Amendment") to the Third Amended and Restated Credit Agreement dated as of
December 20, 2001 by and among CTS Corporation, a Delaware corporation (the
"Borrower"), the financial institutions from time to time party thereto (the
"Lenders"), Bank One, NA, having its principal place of business in Chicago,
Illinois, in its individual capacity as a Lender and in its capacity as
contractual representative (the "Agent"), ABN AMRO Bank, N.V., as documentation
agent and Harris Trust and Savings Bank, as syndication agent (as so modified by
the Amendment and as the same may from time to time hereafter be amended,
restated, supplemented or otherwise modified, the "Credit Agreement").
Capitalized terms used in this Reaffirmation and not defined herein shall have
the meanings given to them in the Credit Agreement.

         Each Guarantor, by its signature below, without in any way establishing
a course of dealing, hereby (i) acknowledges and consents to the execution and
delivery of the Amendment by the parties thereto, (ii) agrees that the Amendment
and the transactions contemplated thereby shall not limit or diminish the
obligations of such Guarantor to guarantee all of the "Obligations" of the
Borrower under and as defined in the Credit Agreement, all of the "Guaranteed
Obligations" under and as defined in the Subsidiary Guaranty and any other
obligations of such Guarantor arising under or pursuant to the Loan Documents,
(iii) reaffirms all of its obligations under the Subsidiary Guaranty and the
other Loan Documents to which it is a party and (iv) agrees that the Subsidiary
Guaranty and each and every other Loan Document executed by it remains in full
force and effect and is hereby reaffirmed, ratified and confirmed. All
references to the Credit Agreement contained the Subsidiary Guaranty or any of
the other Loan Documents shall be a reference to the Credit Agreement as so
modified by the Amendment and as the same may from time to time hereafter be
amended, modified or restated.



Dated: April 15, 2002


              CTS WIRELESS COMPONENTS, INC.

                     /s/ Donald K. Schwanz
              -----------------------------------------------------------------
              Name:  Donald K. Schwanz
              Title: President

              CTS CORPORATION, a Delaware corporation

                     /s/ Donald K. Schwanz
              -----------------------------------------------------------------
              Name:  Donald K. Schwanz
              Title: President



<PAGE>




               DYNAMICS CORPORATION OF AMERICA

                       /s/ Donald K. Schwanz
               -----------------------------------------------------------------
               Name:   Donald K. Schwanz
               Title:  President

               LTB INVESTMENT CORPORATION

                      /s/ Donald K. Schwanz
               -----------------------------------------------------------------
               Name:  Donald K. Schwanz
               Title: President



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
