CTS Corporation (NYSE: CTS) lifts 2026 earnings, cash flow and reserves
CTS Corporation reported higher earnings for the quarter and six months ended June 30, 2026. Net sales were $144,780, up from $135,309 a year earlier, producing gross margin of $60,048. Quarterly net earnings were $19,164 versus $18,527, with diluted EPS of $0.66.
For the first half of 2026, net sales reached $284,010 and net earnings were $36,361, with diluted EPS of $1.26. Operating cash flow improved to $50,735, helping lift cash and cash equivalents to $107,536 while long‑term debt outstanding was $55,000 on a $300,000 credit facility.
CTS recorded remediation reserves of $16,468, including an updated $6,711 estimate for its share of a proposed $7,610 environmental settlement at the Asheville site. The company also repurchased 240,439 shares for $12,101 under its 2025 share repurchase program, leaving 28,567,018 shares outstanding.
In June 2026 CTS announced the promotion of Pratik Trivedi to President and Chief Executive Officer, effective July 6, 2026, with former CEO Kieran OSullivan becoming Executive Chair.
Positive
- None.
Negative
- None.
Filing Explained
CTS has $78,266 thousand of repurchase capacity, while the Asheville settlement still awaits EPA approval.
Under the supplied definition, Form 10-Q is an unaudited quarterly report; this filing places the buyback program at available-capacity stage and the Asheville matter at agreed-in-principle, pending-approval stage.
That means CTS has authorization, not a commitment, for further repurchases, while the recorded Asheville obligation remains subject to EPA approval.
The
The revolving credit facility showed
For Asheville, CTS and the other parties agreed in principle on a
Key Figures
Key Terms
Revolving Credit Facility financial
accumulated other comprehensive income financial
cross-currency swap financial
contingent consideration financial
cash flow hedges financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did CTS (CTS) perform financially in Q2 2026?
What were CTS (CTS) results for the first half of 2026?
What is CTS (CTS) cash and debt position as of June 30, 2026?
How many CTS (CTS) shares are outstanding and what repurchases occurred in 2026?
What environmental remediation obligations does CTS (CTS) report?
How did CTS (CTS) effective tax rate change in 2026?
What leadership changes did CTS (CTS) announce in 2026?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended
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:
(Exact name of registrant as specified in its charter)
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(Address of principal executive offices) |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 21, 2026:
CTS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements |
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Condensed Consolidated Statements of Earnings (Unaudited) For the Three and Six Months Ended June 30, 2026 and June 30, 2025 |
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Condensed Consolidated Statements of Comprehensive Earnings (Unaudited) For the Three and Six Months Ended June 30, 2026 and June 30, 2025 |
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Condensed Consolidated Balance Sheets (Unaudited) As of June 30, 2026 and December 31, 2025 |
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Condensed Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2026 and June 30, 2025 |
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Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) For the Three and Six Months Ended June 30, 2026 and June 30, 2025 |
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Notes to Condensed Consolidated Financial Statements ‑ (Unaudited) |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Quantitative and Qualitative Disclosures about Market Risk |
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Item 4. |
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Controls and Procedures |
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PART II. OTHER INFORMATION |
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Item 1. |
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Legal Proceedings |
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Item 1A. |
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Risk Factors |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 5. |
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Other Information |
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Item 6. |
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Exhibits |
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SIGNATURES |
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - UNAUDITED
(In thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Net sales |
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Cost of goods sold |
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Gross margin |
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Selling, general and administrative expenses |
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Research and development expenses |
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Restructuring charges |
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Operating earnings |
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Other (expense) income: |
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Interest expense |
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Interest income |
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Other (expense) income, net |
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Total other (expense) income, net |
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Earnings before income taxes |
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Income tax expense |
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Net earnings |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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Diluted |
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$ |
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$ |
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Basic weighted – average common shares outstanding: |
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Effect of dilutive securities |
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Diluted weighted – average common shares outstanding: |
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Cash dividends declared per share |
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$ |
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$ |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
3
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS ‑ UNAUDITED
(In thousands)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Net earnings |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss) earnings: |
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Changes in fair market value of derivatives, net of tax |
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Changes in unrealized pension cost, net of tax |
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Cumulative translation adjustment, net of tax |
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Other comprehensive (loss) earnings |
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$ |
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$ |
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$ |
( |
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$ |
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Comprehensive earnings |
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$ |
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$ |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
4
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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(Unaudited) |
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June 30, |
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December 31, |
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2026 |
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2025 |
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ASSETS |
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Current Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance of $ |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease assets, net |
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Other Assets |
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Goodwill |
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Other intangible assets, net |
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Deferred income taxes |
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Other |
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Total other assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current Liabilities |
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Accounts payable |
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$ |
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$ |
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Operating lease obligations |
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Accrued payroll and benefits |
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Accrued expenses and other liabilities |
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Total current liabilities |
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Long-term debt |
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Long-term operating lease obligations |
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Long-term pension obligations |
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Deferred income taxes |
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Other long-term obligations |
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Total Liabilities |
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Commitments and Contingencies (Note 9) |
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Shareholders’ Equity |
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Common stock |
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Additional contributed capital |
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Retained earnings |
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Accumulated other comprehensive income |
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Total shareholders’ equity before treasury stock |
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Treasury stock |
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( |
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( |
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Total shareholders’ equity |
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Total Liabilities and Shareholders’ Equity |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
5
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ‑ UNAUDITED
(In thousands)
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Six Months Ended |
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June 30, |
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June 30, |
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2026 |
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2025 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash provided by operating |
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Depreciation and amortization |
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Pension and other post-retirement plan expense |
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Stock-based compensation |
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Deferred income taxes |
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( |
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Change in fair value of contingent consideration liability |
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(Gain) loss on foreign currency hedges, net of cash |
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( |
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Changes in assets and liabilities, net of acquisitions: |
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Accounts receivable |
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Inventories |
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( |
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( |
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Operating lease assets |
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( |
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Other assets |
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Accounts payable |
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Accrued payroll and benefits |
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( |
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Operating lease liabilities |
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( |
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Accrued expenses and other liabilities |
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( |
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( |
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Pension and other post-retirement plans |
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( |
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( |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Capital expenditures |
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( |
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( |
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Short-term investments |
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Net cash used in investing activities |
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( |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Payments of long-term debt |
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( |
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Proceeds from borrowings of long-term debt |
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Purchases of treasury stock |
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( |
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( |
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Dividends paid |
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( |
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( |
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Taxes paid on behalf of equity award participants |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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( |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes, net |
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$ |
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$ |
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Non-cash financing and investing activities: |
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Capital expenditures incurred but not paid |
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$ |
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$ |
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Excise taxes on purchase of treasury stock incurred not paid |
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$ |
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$ |
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See notes to unaudited condensed consolidated financial statements.
6
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED
(in thousands, except shares and per share amounts)
The following summarizes the changes in total equity for the three and six months ended June 30, 2026:
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Common |
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Additional |
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Retained |
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Accumulated |
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Treasury |
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Total |
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Balances at December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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Changes in fair market value of derivatives, net of tax |
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— |
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— |
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— |
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— |
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Changes in unrealized pension cost, net of tax |
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— |
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— |
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— |
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— |
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Cumulative translation adjustment, net of tax |
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— |
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— |
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— |
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( |
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— |
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( |
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Cash dividends of $ |
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— |
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— |
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( |
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— |
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— |
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( |
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Acquired |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Issued shares on vesting of restricted stock units |
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( |
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— |
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— |
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— |
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( |
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Stock compensation |
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— |
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— |
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— |
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— |
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Balances at March 31, 2026 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Net earnings |
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— |
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— |
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— |
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— |
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Changes in fair market value of derivatives, net of tax |
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|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Changes in unrealized pension cost, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Cumulative translation adjustment, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Cash dividends of $ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Acquired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issued shares on vesting of restricted stock units |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balances at June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See notes to unaudited condensed consolidated financial statements.
7
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED
(in thousands, except shares and per share amounts)
The following summarizes the changes in total equity for the three and six months ended June 30, 2025:
|
|
Common |
|
|
Additional |
|
|
Retained |
|
|
Accumulated |
|
|
Treasury |
|
|
Total |
|
||||||
Balances at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Changes in fair market value of derivatives, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Changes in unrealized pension cost, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Cumulative translation adjustment, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Cash dividends of $ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Acquired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issued shares on vesting of restricted stock units |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balances at March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Changes in fair market value of derivatives, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Changes in unrealized pension cost, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Cumulative translation adjustment, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Cash dividends of $ |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Acquired |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Issued shares on vesting of restricted stock units |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Balances at June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
See notes to unaudited condensed consolidated financial statements.
8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(in thousands, except for share and per share data)
June 30, 2026
NOTE 1 - Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared by CTS Corporation (“CTS”, “we”, “our”, “us” or the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, notes thereto, and other information included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2025.
The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments (consisting of normal recurring items) necessary for a fair statement, in all material respects, of the financial position and results of operations for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.
During the six months ended June 30, 2026, the Company entered into new agreements for the purchase of platinum used in the manufacturing process of certain products. The purchased platinum is presented in Property, plant and equipment, net on the Consolidated Balance Sheets. The platinum is not depreciated because it has very low physical loss and is repeatedly reclaimed and reused in our manufacturing process over a very long useful life. The physical loss of platinum in the manufacturing and reclamation process is treated as depletion and these losses are accounted for as a period expense based on actual units lost. Platinum is reviewed for impairment as part of our assessment of long-lived assets. This review considers all our platinum that is either in place in the production process; in reclamation, fabrication, or refinement in anticipation of re-use; or awaiting use to support increased capacity. Platinum is only acquired to support our operations and is not held for trading purposes.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Accounting Pronouncements Recently Adopted
ASU No. 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which allows for a practical expedient election to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset in the development of a reasonable and supportable forecast as part of estimating expected credit losses. The Company
Recently Issued Accounting Pronouncements Not Yet Adopted
ASU No. 2024-03, “Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses”
In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional information about certain expenses in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The standard can be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting ASU 2024-03.
9
ASU No. 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software”
NOTE 2 – Revenue Recognition
CTS designs and manufactures sensors, actuators, and electronic components for original equipment manufacturers and the U.S. Government. For our customer contracts, we determine the transaction price based on the consideration expected to be received by the Company in exchange for performing its obligations under the applicable contract. We allocate the transaction price to each distinct performance obligation to deliver a good or service, or a collection of goods and/or services, based on the relative standalone selling prices. We usually expect payment from our customers within 30 to 90 days from the shipping date or invoicing date, depending on our terms with the customer. None of our contracts as of June 30, 2026 contained a significant financing component. Differences between the amount of revenue recognized and the amount invoiced, collected from, or paid to our customers are recognized as contract assets or liabilities. Contract assets will be reviewed for impairment when events or circumstances indicate that they may not be recoverable.
To the extent the transaction price includes variable consideration, we estimate the amount of variable consideration that should be included in the transaction price utilizing the most likely value method based on an analysis of historical experience and current facts and circumstances, which may require significant judgment. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.
Our revenue reserves contain uncertainties because they require management to make assumptions and to apply judgment to estimate the value of future credits to customers for product returns, price adjustments, and stock rotation adjustments. We base these estimates on the most likely value method considering all reasonably available information, including our historical experience and current expectations, and are reflected in the transaction price when sales are recorded.
Approximately
We also design, manufacture, and test products for certain customers under contracts that allow the customers to unilaterally terminate the contract for convenience, take control of any work in process, and pay us for costs incurred plus a reasonable profit. Revenue from these contracts is generally recognized over time as the work progresses, either as products are produced or services are rendered, because we generally do not have an alternative use for the completed assets produced and we have an enforceable right to payment for performance completed to date. These contracts may contain a single or multiple performance obligations. The accounting for these contracts involves applying significant judgment with respect to estimating total revenues, costs and profit for each performance obligation. We generally estimate revenue for these contracts using the costs incurred by the Company as we have determined that this method is the most representative of the Company's cumulative efforts relative to the total expected efforts to satisfy the performance obligations. Approximately
See Note 9, “Commitments and Contingencies” for information about our product warranties.
10
Contract Assets and Liabilities
Contract assets and liabilities included in our Condensed Consolidated Balance Sheets are as follows:
|
|
As of |
|
|||||||||
|
|
June 30, |
|
|
December 31, |
|
|
December 31, |
|
|||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Contract Assets |
|
|
|
|
|
|
|
|
|
|||
Unbilled customer receivables included in Other current assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total Contract Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Contract Liabilities |
|
|
|
|
|
|
|
|
|
|||
Customer advance payments included in Accrued expenses and other liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Total Contract Liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The revenue recognized during the six months ended June 30, 2026 and 2025 that was in contract liabilities at the beginning of the period amounted to $
Disaggregated Revenue
The following table presents revenues disaggregated by the major markets we serve:
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Transportation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Industrial |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Medical |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Aerospace & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
NOTE 3 – Accounts Receivable, net
The components of accounts receivable, net are as follows:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accounts receivable, gross |
|
$ |
|
|
$ |
|
||
Less: Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Accounts receivable, gross |
|
$ |
|
|
$ |
|
||
Less: Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
11
NOTE 4 – Inventories, net
Inventories, net consists of the following:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Less: Inventory reserves |
|
|
( |
) |
|
|
( |
) |
Inventories, net |
|
$ |
|
|
$ |
|
||
NOTE 5 – Property, Plant and Equipment, net
Property, plant and equipment, net is comprised of the following:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Land and land improvements |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Machinery and equipment(1) |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
(1)
Depreciation expense for the three months ended June 30, 2026 and June 30, 2025 was $
NOTE 6 – Goodwill and Other Intangible Assets
Goodwill
Changes in the net carrying amount of goodwill were as follows:
|
|
Total |
|
|
Goodwill as of December 31, 2025 |
|
$ |
|
|
Foreign exchange impact |
|
|
( |
) |
Goodwill as of June 30, 2026 |
|
$ |
|
|
Other Intangible Assets
Other intangible assets, net consist of the following components:
|
|
As of |
|
|||||||||
|
|
June 30, 2026 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Amount |
|
|||
Customer lists/relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Technology and other intangibles |
|
|
|
|
|
( |
) |
|
|
|
||
Other intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
12
|
|
As of |
|
|||||||||
|
|
December 31, 2025 |
|
|||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Amount |
|
|||
Customer lists/relationships |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Technology and other intangibles |
|
|
|
|
|
( |
) |
|
|
|
||
Other intangible assets, net |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Amortization expense for the three months ended June 30, 2026 and June 30, 2025 was $
Remaining amortization expense for other intangible assets as of June 30, 2026 is as follows:
|
|
Amortization |
|
|
Remaining 2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total amortization expense |
|
$ |
|
|
NOTE 7 – Costs Associated with Exit and Restructuring Activities
Restructuring charges are reported as a separate line within operating earnings in the Condensed Consolidated Statements of Earnings.
Total restructuring charges are as follows:
|
|
Three Months Ended |
|
|||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Restructuring charges |
|
$ |
|
|
$ |
|
||
|
|
Six Months Ended |
|
|||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Restructuring charges |
|
$ |
|
|
$ |
|
||
During the three months ended June 30, 2026, we incurred total restructuring charges of $
The following table displays the restructuring liability activity included in accrued expenses and other liabilities for the six months ended June 30, 2026:
Restructuring liability at December 31, 2025 |
|
$ |
|
|
Restructuring charges |
|
|
|
|
Costs paid |
|
|
( |
) |
Restructuring liability at June 30, 2026 |
|
$ |
|
13
NOTE 8 – Accrued Expenses and Other Liabilities
The components of accrued expenses and other liabilities are as follows:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accrued product-related costs |
|
$ |
|
|
$ |
|
||
Accrued income taxes |
|
|
|
|
|
|
||
Accrued property and other taxes |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Accrued customer-related liabilities |
|
|
|
|
|
|
||
Dividends payable |
|
|
|
|
|
|
||
Remediation reserves |
|
|
|
|
|
|
||
Derivative liabilities |
|
|
|
|
|
|
||
Other accrued liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other liabilities |
|
$ |
|
|
$ |
|
||
NOTE 9 – Commitments and Contingencies
Certain processes in the manufacture of our current and past products may create by-products classified as hazardous waste. As a result, we have been notified by the U.S. Environmental Protection Agency (“EPA”), state environmental agencies and in some cases, groups of potentially responsible parties, that we may be potentially liable for environmental contamination at several sites currently or formerly owned or operated by us. Currently, none of these costs and accruals relate to sites that provide revenue generating activities for the Company.
A roll-forward of remediation reserves included in accrued expenses and other liabilities on the Condensed Consolidated Balance Sheets is comprised of the following:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Remediation expense |
|
|
|
|
|
|
||
Net remediation payments |
|
|
( |
) |
|
|
( |
) |
Other activity(1) |
|
|
|
|
|
|
||
Balance at end of the period |
|
$ |
|
|
$ |
|
||
The Company operates under and in accordance with a federal consent decree, dated March 7, 2017, with the EPA for the Asheville Site. On February 8, 2023, the Company received a letter from the EPA (the “EPA Letter”) seeking reimbursement of its past response costs and interest thereon relating to any release or threatened release of hazardous substances at the Asheville Site in the aggregate amount of $
14
Unrelated to the environmental claims described above, certain other legal claims are pending against us with respect to matters arising out of the ordinary conduct of our business.
We provide product warranties when we sell our products and accrue for estimated liabilities at the time of sale. Warranty estimates are forecasts based on the best available information and historical claims experience. We accrue for specific warranty claims if we believe that the facts of a specific claim make it probable that a liability in excess of our historical experience has been incurred, and provide disclosures for specific claims whenever it is reasonably possible that a material loss may be incurred which cannot be estimated.
We cannot provide assurance that the ultimate disposition of environmental, legal, and product warranty claims will not materially exceed the amount of our accrued losses and adversely impact our consolidated financial position, results of operations, or cash flows. Our accrued liabilities and disclosures will be adjusted accordingly if additional information becomes available in the future.
NOTE 10 - Debt
Long-term debt is comprised of the following:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Total credit facility |
|
$ |
|
|
$ |
|
||
Balance outstanding |
|
|
|
|
|
|
||
Standby letters of credit |
|
|
|
|
|
|
||
Amount available, subject to covenant restrictions |
|
$ |
|
|
$ |
|
||
Weighted-average interest rate |
|
|
% |
|
|
% |
||
On November 24, 2025, we entered into a
Borrowings in U.S. dollars under the Revolving Credit Facility bear interest, at a per annum rate equal to the applicable Term SOFR rate (but not less than
The Revolving Credit Facility includes a swing line sublimit of $
The Revolving Credit Facility requires, in addition to customary representations and warranties, that we comply with a maximum net leverage ratio and a minimum interest coverage ratio. Failure to comply with these covenants could reduce the borrowing availability under the Revolving Credit Facility. We were in compliance with all debt covenants at June 30, 2026. The Revolving Credit Facility requires that we deliver quarterly financial statements, annual financial statements, auditor certifications, and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the Revolving Credit Facility contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments.
15
We have debt issuance costs related to our long-term debt that are being amortized using the straight-line method over the life of the debt, which approximates the effective interest method. Amortization expense for three and six months ended June 30, 2026 was $
Note 11 - Derivative Financial Instruments
Our earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates and interest rates. We selectively use derivative financial instruments including foreign currency forward contracts as well as interest rate and cross-currency swaps to manage our exposure to these risks.
The use of derivative financial instruments exposes the Company to credit risk, which relates to the risk of nonperformance by a counterparty to the derivative contracts. We manage our credit risk by entering into derivative contracts with only highly-rated financial institutions and by using netting agreements.
The effective portion of derivative gains and losses is recorded in accumulated other comprehensive income (loss) until the hedged transaction affects earnings upon settlement, at which time it is reclassified to cost of goods sold or net sales. If it is probable that an anticipated hedged transaction will not occur by the end of the originally specified time period, we reclassify the gains or losses related to that hedge from accumulated other comprehensive income (loss) to other (expense) income, net.
We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default.
Foreign Currency Hedges
We use forward contracts to mitigate currency risk related to a portion of our forecasted foreign currency revenues and costs. The currency forward contracts are designed as cash flow hedges and are recorded in the Condensed Consolidated Balance Sheets at fair value.
We continue to monitor the Company’s overall currency exposure and may elect to add cash flow hedges in the future. At June 30, 2026, we had a net unrealized gain of $
Interest Rate Swaps
We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest to a fixed rate. As of June 30, 2026, we have agreements to fix interest rates on $
These swaps are treated as cash flow hedges and consequently, the changes in fair value are recorded in other comprehensive earnings (loss). The estimated net amount of the existing gains that are reported in accumulated other comprehensive income (loss) that are expected to be reclassified into earnings within the next twelve months is approximately $
16
Cross-Currency Swap
The Company has operations and investments in various international locations and is subject to risks associated with changing foreign exchange rates. In order to hedge the Krone-based purchase price for the acquisition of Ferroperm Piezoceramics, A.S. (“Ferroperm”), the Company entered into a cross-currency interest rate swap agreement on June 27, 2022 that synthetically swapped $
Accordingly, any gains or losses on this derivative instrument are included in the foreign currency translation component of other comprehensive earnings (loss) until the net investment is sold, diluted or liquidated. As of June 30, 2026, we had a net unrealized loss of $
The location and fair values of derivative instruments designated as hedging instruments in the Condensed Consolidated Balance Sheets as of June 30, 2026, are shown in the following table:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Interest rate swaps reported in Other current assets |
|
$ |
|
|
$ |
|
||
Interest rate swaps reported in Other assets |
|
|
|
|
|
|
||
Cross-currency swap reported in Accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Foreign currency hedges reported in Other current assets |
|
|
|
|
|
|
||
The Company has elected to net its foreign currency derivative assets and liabilities in the balance sheet in accordance with ASC 210-20 (Balance Sheet, Offsetting). On a gross basis, there were foreign currency derivative assets of $
The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Foreign Exchange Contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amounts reclassified from AOCI to earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Cost of goods sold |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total net gain (loss) reclassified from AOCI to earnings |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total derivative gain (loss) on foreign exchange contracts recognized in earnings |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Interest Rate Swaps: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income recorded in Interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cross-Currency Swap: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income recorded in Interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total net gain (loss) on derivatives |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
17
NOTE 12 – Accumulated Other Comprehensive Income (Loss)
Shareholders’ equity includes certain items classified as accumulated other comprehensive income (loss) (“AOCI”) in the Condensed Consolidated Balance Sheets, including:
Changes in exchange rates between the functional currency and the currency in which a transaction is denominated are foreign exchange transaction gains or losses. Transaction losses for the three and six months ended June 30, 2026 were $(
The components of accumulated other comprehensive income (loss) for the three months ended June 30, 2026, are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
March 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
June 30, |
|
||||
|
|
2026 |
|
|
in OCI |
|
|
to Earnings |
|
|
2026 |
|
||||
Changes in fair market value of derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Income tax (expense) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Changes in unrealized pension cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total accumulated other comprehensive income (loss) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
18
The components of accumulated other comprehensive income (loss) for the three months ended June 30, 2025 are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
March 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
June 30, |
|
||||
|
|
2025 |
|
|
in OCI |
|
|
to Earnings |
|
|
2025 |
|
||||
Changes in fair market value of derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income tax benefit (expense) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Changes in unrealized pension cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total accumulated other comprehensive income (loss) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The components of accumulated other comprehensive income (loss) for the six months ended June 30, 2026 are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
December 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
June 30, |
|
||||
|
|
2025 |
|
|
in OCI |
|
|
to Earnings |
|
|
2026 |
|
||||
Changes in fair market value of derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Income tax (expense) benefit |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Changes in unrealized pension cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
$ |
( |
) |
|
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
|
|
|
( |
) |
|
|
|
|
$ |
|
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Total accumulated other comprehensive income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||
19
The components of accumulated other comprehensive income (loss) for the six months ended June 30, 2025 are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
December 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
June 30, |
|
||||
|
|
2024 |
|
|
in OCI |
|
|
to Earnings |
|
|
2025 |
|
||||
Changes in fair market value of derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Income tax benefit (expense) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Changes in unrealized pension cost: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total accumulated other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
NOTE 13 – Shareholders’ Equity
Share count and par value data related to shareholders’ equity are as follows:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
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 |
|
|
|
|
|
|
||
In November 2025, our Board of Directors approved a new share repurchase program authorizing the Company to repurchase up to $
During the three and six months ended June 30, 2026,
We are subject to a 1% excise tax on stock repurchases under the United States Inflation Reduction Act of 2022 which we include in the cost of stock repurchases as a reduction of shareholders’ equity. As of June 30, 2026 and December 31, 2025, we had $
20
A roll-forward of common shares outstanding is as follows:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Balance at the beginning of the year |
|
|
|
|
|
|
||
Repurchases |
|
|
( |
) |
|
|
( |
) |
Restricted share issuances |
|
|
|
|
|
|
||
Balance at the end of the period |
|
|
|
|
|
|
||
Certain restricted stock units are excluded from diluted earnings per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive shares for the three and six months ended June 30, 2026 was
NOTE 14 - Stock-Based Compensation
At June 30, 2026, we had
The 2018 Plan allows for grants of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, and other stock awards subject to its terms.
The following table summarizes the compensation expense included in selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings related to stock-based compensation plans:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Service-based RSUs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance-based RSUs |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Cash-settled RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the unrecognized compensation expense related to unvested RSUs by type and the weighted-average period in which the expense is to be recognized:
|
|
Unrecognized |
|
|
|
|
||
|
|
Compensation |
|
|
Weighted- |
|
||
|
|
Expense at |
|
|
Average |
|
||
|
|
June 30, 2026 |
|
|
Period (years) |
|
||
Service-based RSUs |
|
$ |
|
|
|
|
||
Performance-based RSUs |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
|
||
We recognize expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.
21
The following table summarizes the status of these plans as of June 30, 2026:
|
|
2018 Plan |
|
|
2014 Plan |
|
|
2009 Plan |
|
|
2004 Plan |
|
|
Directors' |
|
|||||
Awards originally available |
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A |
|
|||||
Maximum potential awards outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
RSUs and cash-settled awards vested and released |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Awards available for grant |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Service-Based Restricted Stock Units
The following table summarizes the service-based RSU activity for the six months ended June 30, 2026:
|
|
Units |
|
|
Weighted |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at June 30, 2026 |
|
|
|
|
$ |
|
||
Releasable at June 30, 2026 |
|
|
|
|
$ |
|
||
Performance-Based Restricted Stock Units
The following table summarizes the performance-based RSU activity for the six months ended June 30, 2026:
|
|
Units |
|
|
Weighted |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Attained by performance |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at June 30, 2026 |
|
|
|
|
$ |
|
||
Releasable at June 30, 2026 |
|
|
|
|
$ |
|
||
Cash-Settled Restricted Stock Units
Cash-Settled RSUs entitle the holder to receive the cash equivalent of one share of common stock for each unit when the unit vests. These RSUs are issued to key employees residing in foreign locations as direct compensation. Generally, these RSUs vest over a three-year period. Cash-Settled RSUs are classified as liabilities and are remeasured at each reporting date until settled. At June 30, 2026 and December 31, 2025, we had
22
NOTE 15 - Fair Value Measurements
The table below summarizes our financial assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2026:
|
|
Asset (Liability) Carrying |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Interest rate swaps |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Foreign currency hedges |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Cross-currency swap |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
Qualified replacement plan assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Contingent consideration |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
The table below summarizes the financial assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2025:
|
|
Asset (Liability) Carrying |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Interest rate swaps |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Foreign currency hedges |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Cross-currency swap |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
Qualified replacement plan assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Contingent consideration |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
We use interest rate swaps to convert a portion of our Revolving Credit Facility’s outstanding balance from a variable rate of interest into a fixed rate and foreign currency forward contracts to hedge the effect of foreign currency changes on certain revenues and costs denominated in foreign currencies. The Company entered into a cross-currency swap agreement in order to manage its exposure to changes in interest rates related to foreign debt. These derivative financial instruments are measured at fair value on a recurring basis. The fair value of our interest rate swaps and foreign currency hedges were measured using 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 therefore they are classified within Level 2 of the fair value hierarchy.
The fair value of the contingent consideration requires significant judgment. The Company's fair value estimates used in the contingent consideration valuation are considered Level 3 fair value measurements. The fair value estimates were based on assumptions management believes to be reasonable, but that are inherently uncertain, including estimates of future revenues and timing of events and activities that are expected to take place.
A roll-forward of the contingent consideration is as follows:
|
|
Contingent |
|
|
Balance at December 31, 2025 |
|
$ |
|
|
Change in fair value |
|
|
|
|
Balance at June 30, 2026 |
|
$ |
|
|
As of June 30, 2026, $
Our long-term debt consists of the Revolving Credit Facility, which is recorded at its carrying value. There is a readily determinable market for our 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 approximates its carrying value and was determined by valuing a similar hypothetical coupon bond and attributing that value to our long-term debt under the Revolving Credit Facility.
23
The qualified replacement plan assets consist of investment funds maintained for future contributions to the Company’s U.S. 401(k) program. The investments are Level 1 marketable securities and are recorded in Other Assets on our Condensed Consolidated Balance Sheets.
NOTE 16 - Income Taxes
The effective income tax rates for the three and six months ended June 30, 2026 and 2025 are as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Effective tax rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Our effective income tax rate was
Our effective income tax rate was
NOTE 17 - Segment Information
The Company designs, manufactures, and sells a broad line of sensors, connectivity components, and actuators across multiple end markets in North America, Asia, and Europe. Our Chief Operating Decision Maker (“CODM”), who is our Chief Executive Officer, analyzes the results of our business through
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
(in thousands, except percentages and per share amounts)
The following discussion should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and notes included under Item 1, as well as our Consolidated Financial Statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Overview
CTS is a global manufacturer of sensors, connectivity components, and actuators. CTS was established in 1896 as a provider of high-quality telephone products and was incorporated as an Indiana corporation in February 1929. Our principal executive offices are located in Lisle, Illinois.
We design, manufacture, and sell a broad line of sensors, connectivity components, and actuators primarily to original equipment manufacturers (“OEMs”), tier one suppliers and distributors for the aerospace and defense, industrial, medical, and transportation markets, and the U.S. Government. Our vision is to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world. These devices are categorized by their ability to Sense, Connect or Move. Sense products provide vital inputs to electronic systems. Connect products allow systems to function in synchronization with other systems. Move products ensure required movements are effectively and accurately executed. We are committed to achieving our vision by continuing to invest in the development of products, technologies, and talent within these categories.
We operate manufacturing facilities in North America, Asia, and Europe. Sales and marketing are accomplished through our sales engineers. We also utilize independent manufacturers' representatives and distributors to extend our sales capability.
There is an increasing proliferation of sensing and motion applications within various markets we serve. In addition, the increasing connectivity of various devices to the internet results in greater demand for communication bandwidth and data storage, increasing the need for our connectivity products. Our success is dependent on the ability to execute our strategy to support these trends. We are subject to a number of challenges including, without limitation, periodic market softness, competition from other suppliers, changes in technology, and changes in the economy generally, including inflationary and/or recessionary conditions and increased tariffs, as well as the ability to add new customers, launch new products or penetrate new markets. Many of these, and other risks and uncertainties relating to the Company and our business, are discussed in further detail in Item 1A. of our Annual Report on Form 10-K and other filings made with the SEC.
Recent Developments
On June 25, 2026 we announced the promotion of Pratik Trivedi to President and Chief Executive Officer, effective July 6, 2026. Mr. Trivedi succeeds Kieran O’Sullivan, who will remain on the Board of Directors (the “Board”) and serve as Executive Chair. Mr. Trivedi became a member of the Board, effective July 6, 2026.
25
Results of Operations: Second Quarter 2026 versus Second Quarter 2025
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended June 30, 2026 and June 30, 2025:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
Percent |
|
|
Percentage of Net Sales – |
|
|
Percentage of Net Sales – |
|
|||||
Net sales |
|
$ |
144,780 |
|
|
$ |
135,309 |
|
|
|
7.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold |
|
|
84,732 |
|
|
|
82,878 |
|
|
|
2.2 |
|
|
|
58.5 |
|
|
|
61.3 |
|
Gross margin |
|
|
60,048 |
|
|
|
52,431 |
|
|
|
14.5 |
|
|
|
41.5 |
|
|
|
38.7 |
|
Selling, general and administrative expenses |
|
|
28,390 |
|
|
|
23,077 |
|
|
|
23.0 |
|
|
|
19.6 |
|
|
|
17.1 |
|
Research and development expenses |
|
|
4,763 |
|
|
|
6,326 |
|
|
|
(24.7 |
) |
|
|
3.3 |
|
|
|
4.7 |
|
Restructuring charges |
|
|
94 |
|
|
|
297 |
|
|
|
(68.4 |
) |
|
|
0.1 |
|
|
|
0.2 |
|
Total operating expenses |
|
|
33,247 |
|
|
|
29,700 |
|
|
|
11.9 |
|
|
|
23.0 |
|
|
|
21.9 |
|
Operating earnings |
|
|
26,801 |
|
|
|
22,731 |
|
|
|
17.9 |
|
|
|
18.5 |
|
|
|
16.8 |
|
Total other (expense) income, net |
|
|
(563 |
) |
|
|
251 |
|
|
|
(324.3 |
) |
|
|
(0.4 |
) |
|
|
0.2 |
|
Earnings before income taxes |
|
|
26,238 |
|
|
|
22,982 |
|
|
|
14.2 |
|
|
|
18.1 |
|
|
|
17.0 |
|
Income tax expense |
|
|
7,074 |
|
|
|
4,455 |
|
|
|
58.8 |
|
|
|
4.9 |
|
|
|
3.3 |
|
Net earnings |
|
$ |
19,164 |
|
|
$ |
18,527 |
|
|
|
3.4 |
% |
|
|
13.2 |
% |
|
|
13.7 |
% |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted net earnings per share |
|
$ |
0.66 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|||
Net sales were $144,780 in the second quarter of 2026, an increase of $9,471, or 7.0%, from the second quarter of 2025. Net sales to the diversified end markets increased $10,894, or 14.6%. We achieved continued growth in the medical and industrial end markets, while the aerospace and defense end market declined primarily due to the timing of contract awards. Net sales to the transportation end market decreased $1,423 or 2.3%. Changes in foreign exchange rates increased net sales by $1,354, net of hedges.
Gross margin was $60,048 in the second quarter of 2026, an increase of $7,617, or 14.5%, from the second quarter of 2025. Our gross margin percentage increased from 38.7% for the second quarter of 2025 to 41.5% for the second quarter of 2026 due to improved mix of sales by end market, operational improvements and the favorable impact of changes in foreign exchange rates of approximately $961, net of hedges.
Selling, general and administrative (“SG&A”) expenses were $28,390, or 19.6% of net sales, in the second quarter of 2026 versus $23,077, or 17.1% of net sales, in the second quarter of 2025. The increase in SG&A expenses was primarily driven by higher incentive compensation expense in the second quarter of 2026 due to company performance and a reduction to an acquisition earnout liability in the second quarter of 2025.
Research and development (“R&D”) expenses were $4,763, or 3.3% of net sales, in the second quarter of 2026 compared to $6,326, or 4.7% of net sales, in the comparable quarter of 2025. R&D expenses were lower in the second quarter of 2026 due to a $1,634 one-time customer reimbursement.
Restructuring charges were $94 or 0.1% of net sales in the second quarter of 2026 compared to $297 or 0.2% of net sales in the second quarter of 2025. See Note 7 “Costs Associated with Exit and Restructuring Activities” in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information.
26
Other income and expense items are summarized in the following table:
|
|
Three Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Interest expense |
|
$ |
(704 |
) |
|
$ |
(1,121 |
) |
Interest income |
|
|
571 |
|
|
|
622 |
|
Other (expense) income, net |
|
|
(430 |
) |
|
|
750 |
|
Total other (expense) income, net |
|
$ |
(563 |
) |
|
$ |
251 |
|
Other (expense) income, net is due to foreign currency losses, primarily related to the Euro. Interest expense decreased due to lower borrowings on our Revolving Credit Facility during the second quarter of 2026.
|
|
Three Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Effective tax rate |
|
|
27.0 |
% |
|
|
19.4 |
% |
Our effective income tax rate was 27.0% and 19.4% in the second quarters of 2026 and 2025, respectively. The increase in the effective income tax rate is primarily attributable to the establishment of valuation allowance against certain tax credits.
Results of Operations: Six Months ended June 30, 2026 versus Six Months Ended June 30, 2025
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the six months ended June 30, 2026, and June 30, 2025:
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
Percent |
|
|
Percentage of Net Sales – |
|
|
Percentage of Net Sales – |
|
|||||
Net sales |
|
$ |
284,010 |
|
|
$ |
261,078 |
|
|
|
8.8 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold |
|
|
168,976 |
|
|
|
162,099 |
|
|
|
4.2 |
|
|
|
59.5 |
|
|
|
62.1 |
|
Gross margin |
|
|
115,034 |
|
|
|
98,979 |
|
|
|
16.2 |
|
|
|
40.5 |
|
|
|
37.9 |
|
Selling, general and administrative expenses |
|
|
54,373 |
|
|
|
46,700 |
|
|
|
16.4 |
|
|
|
19.1 |
|
|
|
17.9 |
|
Research and development expenses |
|
|
11,398 |
|
|
|
12,515 |
|
|
|
(8.9 |
) |
|
|
4.0 |
|
|
|
4.8 |
|
Restructuring charges |
|
|
480 |
|
|
|
749 |
|
|
|
(35.9 |
) |
|
|
0.2 |
|
|
|
0.3 |
|
Total operating expenses |
|
|
66,251 |
|
|
|
59,964 |
|
|
|
10.5 |
|
|
|
23.3 |
|
|
|
23.0 |
|
Operating earnings |
|
|
48,783 |
|
|
|
39,015 |
|
|
|
25.0 |
|
|
|
17.2 |
|
|
|
14.9 |
|
Total other (expense) income, net |
|
|
(872 |
) |
|
|
86 |
|
|
|
(1114.0 |
) |
|
|
(0.3 |
) |
|
|
— |
|
Earnings before income taxes |
|
|
47,911 |
|
|
|
39,101 |
|
|
|
22.5 |
|
|
|
16.9 |
|
|
|
15.0 |
|
Income tax expense |
|
|
11,550 |
|
|
|
7,210 |
|
|
|
60.2 |
|
|
|
4.1 |
|
|
|
2.9 |
|
Net earnings |
|
$ |
36,361 |
|
|
$ |
31,891 |
|
|
|
14.0 |
% |
|
|
12.8 |
% |
|
|
12.2 |
% |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted net earnings per share |
|
$ |
1.26 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|||
Net sales were $284,010 in the six months ended June 30, 2026, an increase of $22,932 or 8.8% from the six months ended June 30, 2025. Net sales to the diversified end markets increased $22,686, or 16%. We achieved continued growth in the medical and industrial end markets, while the aerospace and defense end market declined primarily due to the timing of contract awards. Net sales to the transportation end market increased $246, or 0.2%. Changes in foreign exchange rates increased net sales by $4,252, net of hedges.
Gross margin was $115,034 for the six months ended June 30, 2026, an increase of $16,055 or 16.2% from the six months ended June 30, 2025. Our gross margin percentage increased from 37.9% for the six months ended June 30, 2025 to 40.5% for the six months ended June 30, 2026 due to an improved mix of sales by end market, operational improvements, and a favorable impact of changes in foreign exchange rates had a net benefit on our gross margin of approximately $1,632 net of hedges.
27
SG&A expenses were $54,373 or 19.1% of net sales for the six months ended June 30, 2026 versus $46,700 or 17.9% of net sales for the six months ended June 30, 2025. The increase in SG&A expenses was primarily driven by higher employee incentive expense for the six months ended June 30, 2026 due to company performance and a reduction to an acquisition earnout liability in the six months ended June 30, 2025.
R&D expenses were $11,398 or 4.0% of net sales for the six months ended June 30, 2026 compared to $12,515 or 4.8% of net sales for the six months ended June 30, 2025. R&D expenses were lower in the six months ended June 30, 2026 due to a $1,634 one-time customer reimbursement.
Restructuring charges were $480 or 0.2% of net sales for the six months ended June 30, 2026 compared to $749 or 0.3% of net sales for the six months ended June 30, 2025. The restructuring charges in the six months ended June 30, 2026 were primarily related to efficiency enhancements. See Note 7 “Costs Associated with Exit and Restructuring Activities” in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information.
Other income and expense items are summarized in the following table:
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Interest expense |
|
$ |
(1,412 |
) |
|
$ |
(2,289 |
) |
Interest income |
|
|
1,051 |
|
|
|
1,068 |
|
Other (expense) income, net |
|
|
(511 |
) |
|
|
1,307 |
|
Total other (expense) income, net |
|
$ |
(872 |
) |
|
$ |
86 |
|
Other (expense) income, net is due to foreign currency losses, primarily related to the Euro. Interest expense decreased due to lower borrowings on our Revolving Credit Facility during the second quarter of 2026.
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|
June 30, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Effective tax rate |
|
|
24.1 |
% |
|
|
18.4 |
% |
Our effective income tax rate was 24.1% and 18.4% for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective income tax rate is primarily attributable to the establishment of valuation allowances against certain tax credits.
Liquidity and Capital Resources
We historically have funded our capital and operating needs primarily through cash flows from operating activities, supported by available credit under our Revolving Credit Facility (as defined below). We believe that cash flows from operating activities and available borrowings under our Revolving Credit Facility will be adequate to fund our working capital needs, capital expenditures, investments, and debt service requirements for at least the next twelve months and for the foreseeable future thereafter. However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions.
Cash and cash equivalents were $107,536 at June 30, 2026, and $82,295 at December 31, 2025, of which $97,612 and $75,943, respectively, were held outside the United States. Total long-term debt was $55,000 as of June 30, 2026 and $57,500 as of December 31, 2025.
Cash Flow Overview
Cash Flows from Operating Activities
Net cash provided by operating activities was $50,735 during the six months ended June 30, 2026. Components of net cash provided by operating activities included net earnings of $36,361, depreciation and amortization expense of $17,589, other net non-cash items of $7,329, and a net cash outflow from changes in assets and liabilities of $10,544.
28
Net cash provided by operating activities was $43,870 during the six months ended June 30, 2025. Components of net cash provided by operating activities included net earnings of $31,891, depreciation and amortization expense of $17,045, other net non-cash items of $838, and a net cash outflow from changes in assets and liabilities of $5,094.
Cash Flows from Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $6,689 for capital expenditures of $9,577 partially offset by the maturity of short term investments of $2,888.
Net cash used in investing activities for the six months ended June 30, 2025 was $7,745.
Cash Flows from Financing Activities
Net cash used in financing activities for the six months ended June 30, 2026 was $18,704. The net cash outflow was the result of treasury stock purchases of $11,967, net cash payments of long-term debt of $2,500, dividends paid of $2,296, and taxes paid on behalf of equity award participants of $1,941.
Net cash used in financing activities for the six months ended June 30, 2025 was $32,351. The net cash outflow was the result of treasury stock purchases of $22,995, net cash payments of long-term debt of $4,300, taxes paid on behalf of equity award participants of $2,655, dividends paid of $2,401.
Capital Resources
Revolving Credit Facility
Long‑term debt is comprised of the following:
|
|
As of |
|
|||||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Total credit facility |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
Balance outstanding |
|
|
55,000 |
|
|
|
57,500 |
|
Standby letters of credit |
|
|
1,540 |
|
|
|
1,640 |
|
Amount available, subject to covenant restrictions |
|
$ |
243,460 |
|
|
$ |
240,860 |
|
On November 24, 2025, we entered into a five-year revolving credit agreement (the “Revolving Credit Facility”) with a group of banks for a total credit facility availability of $300,000, which may be increased by at least $125,000 pursuant to the Revolving Credit Facility subject to the administrative agent's approval. The Revolving Credit Facility is unsecured and replaced the prior $400,000 revolving credit facility, which would have expired on December 15, 2026. The Revolving Credit Facility matures on November 24, 2030 and modified the financial and non-financial covenants to provide the Company additional flexibility.
Borrowings in U.S. dollars under the Revolving Credit Facility bear interest, at a per annum rate equal to the applicable Term SOFR rate (but not less than 0.0%), plus the Term SOFR adjustment, plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio. Similarly, borrowings of alternative currencies under the Revolving Credit Facility bear interest equal to a defined risk-free reference rate, plus the applicable risk-free rate adjustment plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio. We use interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest to a fixed rate. The contractual rate of these arrangements ranges from 2.45% to 3.36%.
The Revolving Credit Facility includes a swingline sublimit of $20,000, letter of credit sublimit of $20,000, and an alternative currency sublimit of $150,000. We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The commitment fee ranges from 0.175% to 0.25% based on our net leverage ratio. We were in compliance with all debt covenants at June 30, 2026.
29
Critical Accounting Policies and Estimates
The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles. In connection with the preparation of the Condensed Consolidated Financial Statements, the Company uses estimates and makes judgments and assumptions about future events that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. The assumptions, estimates, and judgments are based on historical experience, current trends, and other factors the Company believes are relevant at the time it prepares the Condensed Consolidated Financial Statements.
The critical accounting policies and estimates are consistent with those discussed in Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements and the MD&A section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. During and as of the three and six months ended June 30, 2026, there were no significant changes in the application of critical accounting policies or estimates.
Significant Customers
Our net sales to customers representing at least 10% of total net sales is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Toyota Motor Corporation |
|
|
8.1 |
% |
|
|
12.0 |
% |
|
|
8.3 |
% |
|
|
12.0 |
% |
No other customer accounted for 10% or more of total net sales during these periods. We continue to focus on broadening our customer base to grow our non-transportation end market exposure at a faster rate.
30
Forward‑Looking Statements
Readers are cautioned that the statements contained in this document regarding expectations of our performance or other matters that may affect our business, results of operations, or financial condition are, or may be deemed to be, “forward-looking statements” as defined by the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995. Such statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, included or incorporated in this document, including statements regarding our strategy, financial position, guidance, funding for continued operations, cash reserves, liquidity, projected costs, plans, projects, awards and contracts, and objectives of management, among others, are forward-looking statements. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,” “continued,” “project,” “plan,” “goals,” “opportunity,” “appeal,” “estimate,” “potential,” “predict,” “demonstrates,” “may,” “will,” “might,” “could,” “intend,” “shall,” “possible,” “would,” “approximately,” “likely,” “outlook,” “schedule,” “on track,” “poised,” “pipeline,” and variations of these terms or the negative of these terms and similar expressions are intended to identify these forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are not guarantees of future performance, conditions or results. Forward-looking statements are based on management’s expectations, certain assumptions, and currently available information. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties, and other factors, which could cause CTS’ actual results, performance, or achievements to differ materially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: supply chain disruptions (including, but not limited to, the availability and cost of rare earth elements, minerals and metals); changes in the economy generally, including inflationary and/or recessionary conditions and increased tariffs, and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the funding of contracts by the U.S. Government; the results of actions to reposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance on key customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricing pressures and demand for CTS’ products; risks associated with CTS’ international operations, including trade and tariff barriers, trade pacts, including the future of the USMCA, exchange rates and political and geopolitical risks (including, without limitation, the impact of tariffs on China, Canada and Mexico, and other nations); the potential impact of U.S./China relations and the impact of geopolitical conflicts may have on our business, results of operations and financial condition; write offs of goodwill on our balance sheet; the amount and timing of any share repurchases; and the effect of any cybersecurity incidents on our business. Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A. of CTS’s most recent Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2025. During the six months ended June 30, 2026, there have been no material changes in our exposure to market risk.
31
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q were effective in providing reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within CTS have been detected.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting for the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in litigation with respect to matters arising from the ordinary conduct of our business, and currently certain claims are pending against us. In the opinion of management, we believe we have established adequate accruals pursuant to U.S. generally accepted accounting principles for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based on presently available information. However, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition, or cash flows.
See Note 9 "Commitments and Contingencies" in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There have been no changes to our risk factors from those contained in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On November 7, 2025, the Board of Directors approved a new share repurchase program (“2025 Repurchase Program”) that authorizes the Company to repurchase up to $100 million of its common stock. The 2025 Repurchase Program has no set expiration date and supersedes and replaces the $100 million repurchase program approved by the Board of Directors in February 2024.
32
|
|
|
|
|
|
|
|
Total Number |
|
|
Maximum Dollar |
|
||||
|
|
|
|
|
|
|
|
of Shares |
|
|
Value of Shares |
|
||||
|
|
|
|
|
|
|
|
Purchased as |
|
|
That May Yet Be |
|
||||
|
|
Total Number |
|
|
|
|
|
Part of Publicly |
|
|
Purchased Under |
|
||||
|
|
of Shares |
|
|
Average Price |
|
|
Announced |
|
|
Publicly Announced |
|
||||
Period |
|
Purchased |
|
|
Paid per Share |
|
|
Programs |
|
|
Plans or Programs |
|
||||
April 1, 2026 - April 30, 2026 |
|
|
44,000 |
|
|
$ |
52.51 |
|
|
|
44,000 |
|
|
$ |
79,412,130 |
|
May 1, 2026 - May 31, 2026 |
|
|
19,530 |
|
|
$ |
58.69 |
|
|
|
19,530 |
|
|
$ |
78,265,872 |
|
June 1, 2026 - June 30, 2026 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
78,265,872 |
|
Total |
|
|
63,530 |
|
|
|
|
|
|
63,530 |
|
|
|
|
||
Item 5. Other Information
From time to time, our directors and officers may purchase or sell shares of our common stock in the market, including pursuant to plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended (“Rule 10b5-1 Plans”).
During the quarter ended June 30, 2026, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
33
Item 6. Exhibits
|
|
(31)(a) |
Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. |
|
|
(31)(b) |
Certification pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002. |
|
|
(32)(a) |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. |
|
|
(32)(b) |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. |
|
|
101.1 |
The following information from CTS Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 formatted in Inline XBRL: (i) Condensed Consolidated Statements of Earnings; (ii) Condensed Consolidated Statements of Comprehensive Earnings; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statements of Cash Flows; (v) Condensed Consolidated Statements of Shareholders’ Equity; (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. |
|
|
104 |
The cover page from this Current Report on Form 10-Q formatted as inline XBRL |
|
|
|
|
|
|
34
SIGNATURES
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.
|
|
CTS Corporation |
|
|
|
|
|
/s/ Ashish Agrawal |
|
|
Ashish Agrawal |
|
|
Vice President and Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer) |
|
|
|
|
|
|
|
|
Dated: July 28, 2026 |
35