Cts Corp 10-Q for FY2026 Q1
Cts Corp (CTS)
About this 10-Q
Cts Corp filed this 10-Q on April 29, 2026, covering the quarter ended March 31, 2026 (FY2026 Q1).
Headline figures
Quarter ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $139.23M
- up 10.7% from $125.77M a year earlier
- Net income
- $17.2M
- up 28.7% from net income of $13.37M a year earlier
- Diluted EPS
- $0.59
- up 34.1% from $0.44 a year earlier
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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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification Number) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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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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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 April 22, 2026:
CTS CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
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Item 1. |
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Condensed Consolidated Balance Sheets As of March 31, 2026 (Unaudited) and December 31, 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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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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32 |
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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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March 31, |
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March 31, |
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2026 |
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2025 |
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Net sales |
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$ |
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$ |
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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, 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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Earnings per share: |
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Basic |
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$ |
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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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See notes to unaudited condensed consolidated financial statements.
3
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS ‑ UNAUDITED
(In thousands of dollars)
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Three Months Ended |
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March 31, |
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March 31, |
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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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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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Comprehensive earnings |
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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 of dollars)
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(Unaudited) |
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March 31, |
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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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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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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 of dollars)
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Three Months Ended |
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March 31, |
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March 31, |
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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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Change in fair value of contingent consideration liability |
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Loss on foreign currency hedges, net of cash |
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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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Operating lease assets |
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Other assets |
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Accounts payable |
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Accrued payroll and benefits |
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Operating lease liabilities |
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Accrued expenses and other liabilities |
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Pension and other post-retirement plans |
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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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Short-term investments |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Payments of long-term debt |
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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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Dividends paid |
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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 (decrease) in cash and cash equivalents |
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( |
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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
(in thousands of dollars, except shares and per share amounts)
The following summarizes the changes in total equity for the three months ended March 31, 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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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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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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See notes to unaudited condensed consolidated financial statements.
7
CTS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - UNAUDITED
(in thousands of dollars, except shares and per share amounts)
The following summarizes the changes in total equity for the three months ended March 31, 2025:
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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, 2024 |
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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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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, 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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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)
March 31, 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 three months ended March 31, 2026, the Company entered into a new agreement 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 other 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 adopted ASU 2025-05 effective January 1, 2026 on a prospective basis and elected the practical expedient for the calculation of current expected credit losses. The adoption did not have a material effect on the Company’s consolidated financial statements.
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”
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which is intended to improve the operability and application of guidance related to capitalized software development costs. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-06.
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 March 31, 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 |
|
|||||||||
|
|
March 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
|
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Contract Assets |
|
|
|
|
|
|
|
|
|
|||
Unbilled customer receivables included in Other current assets |
|
$ |
|
|
$ |
|
|
$ |
4,104 |
|
||
Total Contract Assets |
|
$ |
|
|
$ |
|
|
$ |
4,104 |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Contract Liabilities |
|
|
|
|
|
|
|
|
|
|||
Customer advance payments included in Accrued expenses and other liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
(910 |
) |
Total Contract Liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
(910 |
) |
Disaggregated Revenue
The following table presents revenues disaggregated by the major markets we serve:
|
|
Three months ended |
|
|||||
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
||
Transportation |
|
$ |
|
|
$ |
|
||
Industrial |
|
|
|
|
|
|
||
Medical |
|
|
|
|
|
|
||
Aerospace & Defense |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
NOTE 3 – Accounts Receivable, net
The components of accounts receivable, net are as follows:
|
|
As of |
|
|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Accounts receivable, gross |
|
$ |
|
|
$ |
|
||
Less: Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
|
|
As of |
|
|||||
|
|
March 31, |
|
|
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 |
|
|||||
|
|
March 31, |
|
|
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 |
|
|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Land and land improvements |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Machinery and equipment(1) |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended March 31, 2026 and March 31, 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 March 31, 2026 |
|
$ |
|
|
Other Intangible Assets
Other intangible assets, net consist of the following components:
|
|
As of |
|
|||||||||
|
|
March 31, 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 March 31, 2026 and March 31, 2025 was $
Remaining amortization expense for other intangible assets as of March 31, 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 |
|
|||||
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
||
Restructuring charges |
|
$ |
|
|
$ |
|
||
During the quarter ended March 31, 2026, we incurred total restructuring charges of $
The following table displays the restructuring liability activity included in accrued expenses and other liabilities for the three months ended March 31, 2026:
Restructuring liability at December 31, 2025 |
|
$ |
|
|
Restructuring charges |
|
|
|
|
Costs paid |
|
|
( |
) |
Restructuring liability at March 31, 2026 |
|
$ |
|
13
NOTE 8 – Accrued Expenses and Other Liabilities
The components of accrued expenses and other liabilities are as follows:
|
|
As of |
|
|||||
|
|
March 31, |
|
|
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 |
|
|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Balance at beginning of period |
|
$ |
|
|
$ |
|
||
Remediation expense |
|
|
|
|
|
|
||
Net remediation payments |
|
|
( |
) |
|
|
( |
) |
Other activity(1) |
|
|
|
|
|
|
||
Balance at end of the period |
|
$ |
|
|
$ |
|
||
14
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 $
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 |
|
|||||
|
|
March 31, |
|
|
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
15
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 March 31, 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.
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. Amortization expense for the three months ended March 31, 2026 and March 31, 2025 were $
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 are recorded in accumulated other comprehensive income (loss) until the hedged transaction affects earnings upon settlement, at which time they are 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 income (expense), net.
We assess hedge effectiveness qualitatively by verifying that the critical terms of the hedging instrument and the forecasted transaction continue to match, and that there have been no adverse developments that have increased the risk that the counterparty will default.
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 March 31, 2026, we had a net unrealized gain of $
16
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 March 31, 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 (loss) income. 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 $
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 (loss) income until the net investment is sold, diluted or liquidated. As of March 31, 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 March 31, 2026, are shown in the following table:
|
|
As of |
|
|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Interest rate swaps reported in |
|
$ |
|
|
$ |
|
||
Interest rate swaps reported in |
|
|
|
|
|
|
||
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|||
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 $
17
The effect of derivative instruments on the Condensed Consolidated Statements of Earnings is as follows:
|
|
Three Months Ended |
|
|
|||||
|
|
March 31, |
|
|
March 31, |
|
|
||
|
|
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: |
|
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|
|||
Cross-Currency Swap: |
|
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|
|||
Total net gain (loss) on derivatives |
|
$ |
|
|
$ |
( |
) |
|
|
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) gains for the three months ended March 31, 2026 and March 31, 2025 were $(
18
The components of accumulated other comprehensive income (loss) for the three months ended March 31, 2026, are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
December 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
March 31, |
|
||||
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 three months ended March 31, 2025, are as follows:
|
|
|
|
|
|
|
|
(Gain) Loss |
|
|
|
|
||||
|
|
As of |
|
|
Gain (Loss) |
|
|
Reclassified |
|
|
As of |
|
||||
|
|
December 31, |
|
|
Recognized |
|
|
from AOCI |
|
|
March 31, |
|
||||
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Income tax benefit (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total accumulated other comprehensive (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
19
NOTE 13 – Shareholders’ Equity
Share count and par value data related to shareholders’ equity are as follows:
|
|
As of |
|
|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Preferred Stock |
|
|
|
|
|
|
||
Par value per share |
|
par value |
|
|
par value |
|
||
Shares authorized |
|
|
|
|
|
|
||
Shares outstanding |
|
|
|
|
|
|||
Common Stock |
|
|
|
|
|
|
||
Par value per share |
|
par value |
|
|
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 months ended March 31, 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 March 31, 2026 and December 31, 2025, we had $
A roll-forward of shares of common stock outstanding is as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|
March 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Balance at the beginning of the year |
|
|
|
|
|
|
||
Repurchases |
|
|
( |
) |
|
|
( |
) |
Restricted share issuances |
|
|
|
|
|
|
||
Balance at the end of the period |
|
|
|
|
|
|
||
Certain potentially dilutive restricted stock units are excluded from diluted earnings per share because they are anti-dilutive. The number of outstanding awards that were anti-dilutive for the three months ended March 31, 2026 and March 31, 2025 were
20
NOTE 14 – Stock-Based Compensation
At March 31, 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 the terms of the 2018 Plan.
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 |
|
|||||
|
|
March 31, |
|
|
March 31, |
|
||
|
|
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 |
|
||
|
|
March 31, 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.
The following table summarizes the status of these plans as of March 31, 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 |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
21
Service-Based Restricted Stock Units
The following table summarizes the service-based RSU activity for the three months ended March 31, 2026:
|
|
Units |
|
|
Weighted |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at March 31, 2026 |
|
|
|
|
$ |
|
||
Releasable at March 31, 2026 |
|
|
|
|
$ |
|
||
Performance-Based Restricted Stock Units
The following table summarizes the performance-based RSU activity for the three months ended March 31, 2026:
|
|
Units |
|
|
Weighted |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Attained by performance |
|
|
|
|
|
|
||
Released |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at March 31, 2026 |
|
|
|
|
$ |
|
||
Releasable at March 31, 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 March 31, 2026 and December 31, 2025, we had
NOTE 15 – Fair Value Measurements
The table below summarizes our financial assets and liabilities that were measured at fair value on a recurring basis at March 31, 2026:
|
|
Asset (Liability) Carrying |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Interest rate swaps |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Foreign currency hedges |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Cross-currency swap |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
Qualified replacement plan assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Contingent consideration |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
( |
) |
22
The table below summarizes the financial assets and liabilities that were measured at fair value on a recurring basis at 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 March 31, 2026 |
|
$ |
|
|
As of March 31, 2026, all contingent consideration was recorded in other long-term obligations on our Condensed Consolidated Balance Sheets.
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.
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.
23
NOTE 16 – Income Taxes
The effective tax rates for the three months ended March 31, 2026 and March 31, 2025 are as follows:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|
March 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Effective tax rate |
|
|
% |
|
|
% |
||
The increase in the effective income tax rate is primarily attributed to a change in mix of earnings taxed at higher rates. The first quarter 2025 and 2026 effective income tax rates were lower than the U.S. statutory federal income tax rate primarily due to foreign earnings that are taxed at lower rates and tax benefits recorded upon vesting of RSUs.
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. , 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 of dollars, 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 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, changes in the economy generally, including inflationary and/or recessionary conditions and increased tariffs, geopolitical conflicts, availability and cost of rare earth elements, minerals, and metals, 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.
25
Results of Operations: First Quarter 2026 versus First Quarter 2025
The following table highlights changes in significant components of the Unaudited Condensed Consolidated Statements of Earnings for the quarters ended March 31, 2026 and March 31, 2025:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
|
Percent |
|
|
Percentage of Net Sales – |
|
|
Percentage of Net Sales – |
|
|||||
Net sales |
|
$ |
139,230 |
|
|
$ |
125,769 |
|
|
|
10.7 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold |
|
|
84,244 |
|
|
|
79,220 |
|
|
|
6.3 |
|
|
|
60.5 |
|
|
|
63.0 |
|
Gross margin |
|
|
54,986 |
|
|
|
46,549 |
|
|
|
18.1 |
|
|
|
39.5 |
|
|
|
37.0 |
|
Selling, general and administrative expenses |
|
|
25,984 |
|
|
|
23,623 |
|
|
|
10.0 |
|
|
|
18.7 |
|
|
|
18.8 |
|
Research and development expenses |
|
|
6,634 |
|
|
|
6,190 |
|
|
|
7.2 |
|
|
|
4.8 |
|
|
|
4.9 |
|
Restructuring charges |
|
|
386 |
|
|
|
451 |
|
|
|
(14.4 |
) |
|
|
0.3 |
|
|
|
0.4 |
|
Total operating expenses |
|
|
33,004 |
|
|
|
30,264 |
|
|
|
9.1 |
|
|
|
23.7 |
|
|
|
24.1 |
|
Operating earnings |
|
|
21,982 |
|
|
|
16,285 |
|
|
|
35.0 |
|
|
|
15.8 |
|
|
|
12.9 |
|
Total other income (expense), net |
|
|
(309 |
) |
|
|
(163 |
) |
|
|
89.6 |
|
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Earnings before income taxes |
|
|
21,673 |
|
|
|
16,122 |
|
|
|
34.4 |
|
|
|
15.6 |
|
|
|
12.8 |
|
Income tax expense |
|
|
4,476 |
|
|
|
2,755 |
|
|
|
62.5 |
|
|
|
3.2 |
|
|
|
2.2 |
|
Net earnings |
|
$ |
17,197 |
|
|
$ |
13,367 |
|
|
|
28.7 |
% |
|
|
12.4 |
% |
|
|
10.6 |
% |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted net earnings per share |
|
$ |
0.59 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
|||
Net sales were $139,230 in the first quarter of 2026, an increase of $13,461 or 10.7% from the first quarter of 2025. Net sales to the diversified end markets increased $11,792 or 17.5% while net sales to transportation markets increased $1,669 or 2.9%. Changes in foreign exchange rates increased net sales by $2,898, net of hedges, due to the U.S. Dollar depreciating compared to the Euro.
Gross margin was $54,986 in the first quarter of 2026, an increase of $8,437 or 18.1% from the first quarter of 2025. The increase in gross margin was driven by improved mix of sales to our diversified end markets as well as efficiency improvements. Changes in foreign exchange rates increased gross margin by $672, net of hedges, due to the U.S. Dollar depreciating compared to the Euro. See Note 11, “Derivative Financial Instruments” in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further information. As a result, our gross margin percentage increased from 37.0% for the first quarter of 2025 to 39.5% for the first quarter of 2026.
Selling, general and administrative (“SG&A”) expenses were $25,984 or 18.7% of net sales in the first quarter of 2026, versus $23,623 or 18.8% of net sales in the first quarter of 2025. The increase in SG&A expenses is primarily related to an increase in incentive compensation expense.
Research and development (“R&D”) expenses were $6,634 or 4.8% of net sales in the first quarter of 2026 compared to $6,190 or 4.9% of net sales in the first quarter of 2025. Our R&D expenses are in line with our commitment to continue investing in research and product development to drive organic growth.
Restructuring charges were $386 or 0.3% of net sales in the first quarter of 2026 compared to $451 or 0.4% of net sales in the first quarter of 2025. The restructuring charges in the quarter ended March 31, 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.
26
Other income and expense items are summarized in the following table:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|
March 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Interest expense |
|
$ |
(708 |
) |
|
$ |
(1,167 |
) |
Interest income |
|
|
480 |
|
|
|
447 |
|
Other (expense) income, net |
|
|
(81 |
) |
|
|
557 |
|
Total other expense, net |
|
$ |
(309 |
) |
|
$ |
(163 |
) |
Interest expense decreased due to lower borrowings in the first quarter of 2026 compared to the first quarter of 2025.
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|
March 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Effective tax rate |
|
|
20.7 |
% |
|
|
17.1 |
% |
Our effective income tax rate was 20.7% and 17.1% in the first quarters of 2026 and 2025, respectively. The increase in the effective income tax rate is primarily attributed to a change in mix of earnings taxed at higher rates.
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 $90,851 at March 31, 2026, and $82,295 at December 31, 2025, of which $89,576 and $75,943, respectively, were held outside the United States. Total long-term debt was $62,500 as of March 31, 2026 and $57,500 as of December 31, 2025.
Cash Flow Overview
Cash Flows from Operating Activities
Net cash provided by operating activities was $17,295 during the three months ended March 31, 2026. Components of net cash provided by operating activities included net earnings of $17,197, depreciation and amortization expense of $8,810, other net non-cash items of $2,940, and a net cash outflow from changes in assets and liabilities of $11,652.
Net cash provided by operating activities was $15,518 during the three months ended March 31, 2025. Components of net cash provided by operating activities included net earnings of $13,367, depreciation and amortization expense of $8,494, other net non-cash items of $1,339, and a net cash outflow from changes in assets and liabilities of $7,682.
Cash Flows from Investing Activities
Net cash used in investing activities was $2,109 for the three months ended March 31, 2026, driven by capital expenditures of $4,997 partially offset by the maturity of short term investments of $2,888.
Net cash used in investing activities was $4,465 for the three months ended March 31, 2025, driven entirely by capital expenditures.
Cash Flows from Financing Activities
Net cash used in financing activities for the three months ended March 31, 2026 was $6,441. The net cash outflow was the result of treasury stock purchases of $8,558 (net of excise taxes unpaid), dividends paid of $1,151, taxes paid on behalf of equity award participants of $1,732, partially offset by net cash borrowed on long-term debt of $5,000.
27
Net cash used in financing activities for the three months ended March 31, 2025 was $15,900. The net cash outflow was the result of treasury stock purchases of $6,465 (net of excise taxes unpaid), dividends paid of $1,201, taxes paid on behalf of equity award participants of $2,634, and net cash used in the paydown of long-term debt of $5,600.
Capital Resources
Revolving Credit Facility
Long‑term debt is comprised of the following:
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As of |
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|||||
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Total credit facility |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
Balance outstanding |
|
|
62,500 |
|
|
|
57,500 |
|
Standby letters of credit |
|
|
1,640 |
|
|
|
1,640 |
|
Amount available, subject to covenant restrictions |
|
$ |
235,860 |
|
|
$ |
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 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, and 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 and plus an applicable margin, which ranges from 1.00% to 1.75%, based on our net leverage ratio. We use interest rate swaps to convert a portion of our revolving credit facility's outstanding balance from a variable rate of interest to a fixed rate. The contractual rate of these arrangements ranges from 2.45% to 3.36%.
The Revolving Credit Facility includes a swingline sublimit of $20,000 and a 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 March 31, 2026.
Critical Accounting Policies and Estimates
The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP. 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. Refer to Note 1, “Basis of Presentation” for updates to the Company’s critical accounting policies and estimates during the three months ended March 31, 2026.
28
Significant Customers
Our net sales to customers representing at least 10% of total net sales is as follows:
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|
Three Months Ended |
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|||||
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
||
Cummins Inc. |
|
|
10.4 |
% |
|
|
10.3 |
% |
Toyota Motor Corporation |
|
|
8.5 |
% |
|
|
11.9 |
% |
No other customer accounted for 10% or more of total net sales during these periods.
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, 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.
29
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 three months ended March 31, 2026, there have been no material changes in our exposure to market risk.
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 March 31, 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.
30
Item 2. Unregistered Sales of Equity 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.
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Total Number |
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|
Maximum Dollar |
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||||
|
|
|
|
|
|
|
|
of Shares |
|
|
Value of Shares |
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||||
|
|
|
|
|
|
|
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Purchased as |
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|
That May Yet Be |
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||||
|
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Total Number |
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|
|
|
|
Part of Publicly |
|
|
Purchased Under |
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||||
|
|
of Shares |
|
|
Average Price |
|
|
Announced |
|
|
Publicly Announced |
|
||||
Period |
|
Purchased |
|
|
Paid per Share |
|
|
Programs |
|
|
Plans or Programs |
|
||||
January 1, 2026 - January 31, 2026 |
|
|
75,509 |
|
|
$ |
47.03 |
|
|
|
75,509 |
|
|
$ |
86,815,562 |
|
February 1, 2026 - February 28, 2026 |
|
|
28,500 |
|
|
$ |
55.07 |
|
|
|
28,500 |
|
|
$ |
85,246,189 |
|
March 1, 2026 - March 31, 2026 |
|
|
72,900 |
|
|
$ |
48.33 |
|
|
|
72,900 |
|
|
$ |
81,722,663 |
|
Total |
|
|
176,909 |
|
|
|
|
|
|
176,909 |
|
|
|
|
||
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 March 31, 2026, no other director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
31
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. |
|
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(32)(a) |
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|
|
(32)(b) |
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|
|
10(a) |
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|
10(b) |
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101.1 |
The following information from CTS Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 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 |
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|
|
|
32
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.
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CTS Corporation |
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|
|
|
|
/s/ Ashish Agrawal |
|
|
Ashish Agrawal |
|
|
Vice President and Chief Financial Officer (Principal Financial Officer & Principal Accounting Officer) |
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|
|
Dated: April 29, 2026 |
33
EXHIBIT 10(a)
CTS Corporation
2018 Equity and incentive compensation plan
RESTRICTED STOCK UNIT AWARD AGREEMENT
CTS Corporation (the “Company”) has granted to the participant listed below (“Participant”) the restricted stock units (the “RSUs”) described in this Restricted Stock Unit Award Agreement, including the Key Terms, General Terms and Annexes hereunder (this “Agreement”), subject to the terms and conditions of this Agreement and the CTS Corporation 2018 Equity and Incentive Compensation Plan (as amended from time to time, the “Plan”), which is incorporated into this Agreement by reference. For purposes of this Agreement, references to the “Company” shall include any subsidiary employer, as applicable. Except as expressly provided herein, capitalized terms used herein shall have the meaning ascribed to such terms under the Plan.
KEY TERMS
Participant: |
|
Grant Date: |
|
Number of RSUs Granted: |
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Vesting Schedule: |
Subject to and conditioned upon Participant’s continued employment or service with the Company through the applicable Vesting Date, and further subject to the terms and conditions of this Agreement and the Plan, the RSUs shall vest and become payable as follows: |
|
Percentage of First Anniversary of Grant Date 33.33% Second Anniversary of Grant Date 33.34% Third Anniversary of Grant Date 33.33% Notwithstanding the foregoing, the RSUs shall be subject to accelerated vesting in certain circumstances as provided in this Agreement.
|
Termination of Employment or Service; Acceleration |
Any unvested RSUs outstanding as of Participant’s termination of employment or service will be forfeited, except as otherwise provided in this Agreement. In the event of Participant’s termination of employment or service due to death or disability (as defined by Section 409A of the Code or, if required, by applicable local law), Participant shall immediately vest in the unvested RSUs, and such vested RSUs will be settled between January 1st and March 15th of the calendar year following the applicable Vesting Date set forth above in these Key Terms (regardless of the actual date of termination due to Participant’s death or disability). In the event of the earlier to occur of (i) a Change in Control if the successor or surviving company does not assume, substitute |
1
|
or continue the Award on substantially similar terms or with substantially equivalent benefits (as determined by the Committee prior to the Change in Control) or the stock of the successor or surviving company following a Change in Control is not listed on the New York Stock Exchange or the NASDAQ Stock Market, or (ii) during the 24-month period following a Change in Control, the termination of Participant’s employment or service by the Company or its successor or surviving company without Cause (as defined in the General Terms) or due to a Constructive Termination (as defined in the General Terms), then, in each case, Participant shall immediately vest in the unvested RSUs, and such vested RSUs will be settled within thirty (30) days of the Change in Control or employment termination date, as applicable (the “Accelerated Vesting Date”). A termination of employment under clause (ii) of the preceding sentence is referred to under this Agreement as a “Qualified Termination”. |
|
On or before March 15th of the calendar year immediately following the applicable Vesting Date; provided, however, that (i) if vesting accelerates due to the termination of Participant’s employment or service due to death or disability, the Settlement Date shall be between January 1st and March 15th of the calendar year immediately following the applicable Vesting Date, and (ii) if vesting accelerates due to a Qualified Termination within 24 months following a Change in Control or the occurrence of a Change in Control (if the successor or surviving company does not assume, substitute or continue the Award) or the stock of the successor or surviving company no longer being listed on the New York Stock Exchange or the NASDAQ Stock Market, the Settlement Date shall be within thirty (30) days of the Accelerated Vesting Date. In no event may any Settlement Date be accelerated except in accordance with Section 409A of the Code or applicable local law. |
Form of Settlement |
One (1) Share for each vested RSU; provided, however, that the RSUs may be settled in the form of cash to the extent settlement in Shares (i) is not standard Company practice in Participant’s country of employment or service, (ii) is prohibited under applicable laws, (iii) would require Participant, the Company or, if different, the Affiliate that employs Participant to obtain the approval of any governmental and/or regulatory body in Participant’s country of residence (and country of employment or service, if different), or (iv) is administratively burdensome. |
2
GENERAL TERMS
Award; VESTING; forfeiture AND SETTLEMENT
1.3 Termination of Employment or Service; Change in Control.
3
4
TAXATION AND TAX WITHHOLDING
5
RESTRICTIVE COVENANTS
6
7
OTHER PROVISIONS
8
9
10
11
4.23 Exclusion from Termination Indemnities and Other Benefits. This Section 4.23applies if the Participant resides outside the U.S.: The value of the RSUs and any other awards granted under the Plan is an extraordinary item of compensation outside the scope of the Participant’s employment with the Company or any subsidiary of the Company (and the Participant’s employment contract, if any). Any grant under the Plan, including the grant of the RSUs and the income and value of same, is not part of normal or expected
12
compensation or salary. Further, the RSUs and the Shares, and the income and value of same, are not intended to replace any pension rights or compensation.
13
IN WITNESS WHEREOF, the Company and Participant have duly executed this Agreement as of the Grant Date above.
CTS CORPORATION
By:
Name:
Title:
PARTICIPANT
Name:
ANNEX A: STATE-SPECIFIC TERMS
The Award is subject to the following additional terms, conditions and notices as set forth in this Annex A to the extent Participant resides and/or is employed in one of the states addressed herein. All defined terms contained in this Annex A shall have the same meaning as set forth in the Plan and this Agreement.
A-1
ANNEX B: TERMS AND CONDITIONS APPLICABLE TO PARTICIPANTS OUTSIDE THE U.S.
The Award is subject to the following additional terms, conditions and notices as set forth in this Annex B to the extent Participant resides and/or is employed in one of the countries addressed herein. The information reflected herein is based on the securities, exchange control and other laws in effect in the respective countries as of the Grant Date. All defined terms as contained in this Annex B shall have the same meaning as set forth in the Plan and this Agreement. The Company and Committee may establish new or alternative terms and conditions to the extent they determine, in their discretion, that the application of such new or alternative terms and conditions is necessary or advisable in order to comply with local laws, rules and regulations, or to facilitate the operation and administration of the Award and the Plan.
The following provision applies if the Participant is subject to exchange control restrictions and regulations in the People's Republic of China (“PRC”), including the requirements imposed by the China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole discretion:
Vesting. Notwithstanding anything to the contrary in the Plan or the Agreement, the RSUs will not vest and no Shares will be issued to the Participant unless and until all necessary exchange control or other approvals with respect to the RSUs under the Plan have been obtained from the SAFE or its local counterpart (“SAFE Approval”). In the event that SAFE Approval has not been obtained prior to any date(s) on which the RSUs are scheduled to vest in accordance with the vesting schedule set forth in the Agreement, the RSUs will not vest until the seventh day of the month following the month in which SAFE Approval is obtained (the “Actual Vesting Date”). If the Participant’s status as an employee terminates prior to the Actual Vesting Date, the Participant shall not be entitled to vest in any portion of the RSUs and the RSUs shall be forfeited without any liability to the Company or any subsidiary or affiliate of the Company.
Exchange Control Requirements. Due to exchange control laws in the PRC, Shares acquired through RSU vestings must be maintained in the Morgan Stanley (or any successor broker designated by the Company) brokerage account until the Shares are sold. When the Shares are sold, all proceeds must be repatriated to the PRC and held in a special exchange control account maintained by the Company or one of the Company’s subsidiaries in the PRC. To the extent that the Participant holds any Shares on the date that is three (3) months (or such other period as may be required by the SAFE) after the date of the Participant’s termination of employment with the Company or one of the Company’s subsidiaries in the PRC, the Participant authorizes Morgan Stanley (or any successor broker designated by the Company) to sell such Shares on the Participant’s behalf at that time or as soon as is administratively practical thereafter. The Participant understands and agrees that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay the Participant the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.
The Participant further is required to repatriate to the PRC any dividends or dividend equivalents paid to the Participant in relation to RSUs through a special exchange control account established by the Company or one of the Company’s subsidiaries in the PRC. The Participant hereby agrees that any cash proceeds from the Participant’s participation in the Plan may be transferred to such special account prior to being delivered to the Participant.
The Participant also understands and agrees that there will be a delay between the date the Shares are sold and the date the cash proceeds are distributed to the Participant. The Participant agrees to bear any currency fluctuation risk between the time the Shares are sold and the time the cash proceeds are distributed to the Participant through the special account described above. The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in the PRC
.
Tax Liability. Taxes are due at the time of vesting of the RSUs. The Participant understands and agrees that Tax-Related Items may be taken by the Employer from the Participant’s salary or other cash compensation.
Danish Stock Option Act. By participating in the Plan, the Participant acknowledges that he or she received an Employer Statement translated into Danish, which is being provided to comply with the Danish Stock Option Act, as amended effective January 1, 2019, and is attached hereto as Appendix C.
Foreign Asset / Account Reporting Information. If the Participant establishes an account holding Shares or cash outside Denmark, the Participant must report the account to the Danish Tax Administration. The form which should be used in this respect can be obtained from a local bank.
Foreign Asset / Account Reporting Information. The Participant will be required to report details of any assets held outside Japan as of December 31st to the extent such assets have a total net fair market value exceeding ¥50,000,000. This report is due by March 15th each year. The Participant should consult with his or her personal tax advisor as to whether the reporting obligation applies to him or her and whether the requirement extends to any outstanding RSUs or Shares acquired under the Plan.
Acknowledgment of the Agreement. By participating in the Plan, Participant acknowledges that the Participant has received a copy of the Plan, has reviewed the Plan in its entirety and fully understands and accepts all provisions of the Plan. The Participant further acknowledges that the Participant has read and expressly approves the terms and conditions set forth in the Agreement, in which the following is clearly described and established: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in the Plan are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) the Company and its subsidiaries are not responsible for any decrease in the value of the underlying Shares.
Labor Law Policy and Acknowledgment. By participating in the Plan, the Participant expressly recognizes that CTS Corporation, with registered offices at 4925 Indiana Avenue, Lisle, IL. 60532 U.S.A., is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan and acquisition of Shares does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis. Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from participation in the Plan do not establish any rights between the Participant and the Company and do not form part of the employment conditions and/or benefits provided by the Company and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant's employment.
The Participant further understands that the Participant’s participation in the Plan is as a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant's participation at any time without any liability to the Participant.
Finally, the Participant hereby declares that Participant does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and the Participant therefore grants a full and broad release to the Company, its subsidiaries, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.
Reconocimiento del Contrato. Al participar en el Plan, usted reconoce que ha recibido una copia del Plan, que ha revisado el Plan en su totalidad, y que entiende y acepta en su totalidad, todas y cada una de las
disposiciones del Plan. Asimismo reconoce que ha leído y aprueba expresamente los términos y condiciones señalados en el párrafo titulado Naturaleza de la Oferta en el Convenio, en lo que claramente se describe y establece lo siguiente: (i) su participación en el Plan no constituye un derecho adquirido; (ii) el Plan y su participación en el Plan son ofrecidos por la Compañía sobre una base completamente discrecional; (iii) su participación en el Plan es voluntaria; y (iv) la Compañía y sus afiliadas no son responsables de ninguna por la disminución en el valor de las Acciones subyacentes
.
Política de Legislación Laboral y Reconocimiento. Al participar en el Plan, usted reconoce expresamente que CTS Corporation., con oficinas registradas en 4925 Indiana Avenue, Lisle, IL. 60532 EE.UU, es la única responsable por la administración del Plan, y que su participación en el Plan, así como la adquisición de las Acciones, no constituye una relación laboral entre usted y la Compañía, debido a que usted participa en el plan sobre una base completamente mercantil. Con base en lo anterior, usted reconoce expresamente que el Plan y los beneficios que pudiera obtener por su participación en el Plan, no establecen derecho alguno entre usted y la Compañía, y no forman parte de las condiciones y/o prestaciones laborales que la Compañía ofrece, y que las modificaciones al Plan o su terminación, no constituirán un cambio ni afectarán los términos y condiciones de su relación laboral.
Asimismo usted entiende que su participación en el Plan es el resultado de una decisión unilateral y discrecional de la Compañía; por lo tanto, la Compañía se reserva el derecho absoluto de modificar y/o suspender su participación en cualquier momento, sin que usted incurra en responsabilidad alguna.
Finalmente, usted declara que no se reserva acción o derecho alguno para interponer reclamación alguna en contra de la Compañía, por concepto de compensación o daños relacionados con cualquier disposición del Plan o de los beneficios derivados del Plan, y por lo tanto, usted libera total y ampliamente de toda responsabilidad a la Compañía, a sus afiliadas, sucursales, oficinas de representación, sus accionistas, funcionarios, agentes o representantes legales, con respecto a cualquier reclamación que pudiera surgir.
Securities Law Information. The securities being offered or sold herein have not been registered with the Philippines Securities and Exchange Commission (“PSEC”) under its Securities Regulation Code (the “SRC”).
The grant of RSUs is being made pursuant to an exemption from registration under Section 10.2 of the SRC that has been approved by the PSEC.
The Participant should be aware of the risks of participating in the Plan, which include (without limitation) the risk of fluctuation in the price of the Shares on the New York Stock Exchange (“NYSE”) and the risk of currency fluctuations between the U.S. Dollar and his or her local currency. In this regard, the Participant should note that the value of any Shares he or she may acquire under the Plan may decrease, and fluctuations in foreign exchange rates between his or her local currency and the U.S. Dollar may affect the value of the Shares or any amounts due to the Participant pursuant to the vesting of the RSUs or the subsequent sale of any Shares acquired by the Participant. The Company is not making any representations, projections or assurances about the value of the Shares now or in the future.
For further information on risk factors impacting the Company’s business that may affect the value of the Shares, the Participant should refer to the risk factors discussion in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company’s website at http://investors.ctscorp.com/financials/sec-filings/default.aspx
The Participant should also note that the sale or disposal of Shares acquired under the Plan may be subject to certain restrictions under Philippines securities laws. Those restrictions should not apply if the offer and resale of Shares takes place outside of the Philippines through the facilities of a stock exchange on which the Shares are listed. The Shares are currently listed on the NYSE. The Company’s designated broker should be able to assist the Participant in the sale of Shares on NYSE.
If the Participant has questions with regard to the application of Philippines securities laws to the disposal or sale of Shares acquired under the Plan the Participant should consult with his or her legal advisor.
Foreign Asset/Account Reporting Information. If the Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, the Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7,000,000. If required, such reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland.
Exchange Control Information. The transfer of funds in excess of a certain threshold (currently €15,000, unless the transfer of funds is considered to be connected with the business activity of an entrepreneur, in which case a lower threshold may apply) into or out of Poland must be made through a bank account in Poland. The Participant understands that he or she is required to store all documents connected with any foreign exchange transactions for a period of five years, as measured from the end of the year in which such transaction occurred. The Participant should consult with his or her personal legal advisor to determine what he or she must do to fulfill any applicable reporting/exchange control duties.
Securities Law Information. The RSUs were granted to the Participant pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Agreement and the Plan have not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the Participant’s RSUs are subject to section 257 of the SFA and the Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer and Director Notification. If the Participant is the Chief Executive Officer (“CEO”) or a director, associate director or shadow director of a subsidiary or other related company in Singapore, the Participant is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore subsidiary in writing when the Participant receives an interest (e.g., RSUs, Shares) in the Company or any related company. In addition, the Participant must notify the Singapore subsidiary when the Participant sells Shares of the Company or any related company (including when the Participant sells Shares acquired under the Plan). These notifications must be made within two (2) business days of (i) acquiring or disposing of any interest in the Company or any related company, or (ii) any change in a previously-disclosed interest (e.g.upon vesting of the RSUs or when Shares are subsequently sold). In addition, a notification must be made of the Participant’s interests in the Company or any related company within two (2) business days of becoming a CEO or director, associate director, or shadow director.
Data Privacy. The Participant acknowledges that he or she has read and understands the terms regarding collection, processing and transfer of Data contained in the Privacy Notice in Section 4.22 of the Agreement and Section II(1) of this Annex B and agrees that, upon request of the Company, the Participant will provide any executed data privacy consent form to the Company (or any other agreements or consents that may be required by the Company) that the Company may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. The Participant understands he or she will not be able to participate in the Plan if the Participant fails to execute any such consent or agreement.
Securities Law Information. The RSUs and participation in the Plan is made available only to employees of the Company and its subsidiaries. It is not a public offer of securities by a Taiwanese company. Therefore, it is exempt from registration in Taiwan.
Exchange Control Information. Individuals may acquire foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year without justification. There is no need to aggregate all remittances into Taiwan when calculating the limitation. If the transaction amount is TWD$500,000 or more in a single transaction, the Participant must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank.
EXHIBIT 10(b)
CTS Corporation
2018 Equity and incentive compensation plan
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
CTS Corporation (the “Company”) has granted to the participant listed below (“Participant”) the performance-based restricted stock units (the “RSUs”) described in this Restricted Stock Unit Award Agreement, including the Key Terms, General Terms and Annexes hereunder (this “Agreement”), subject to the terms and conditions of this Agreement and the CTS Corporation 2018 Equity and Incentive Compensation Plan (as amended from time to time, the “Plan”), which is incorporated into this Agreement by reference. For purposes of this Agreement, references to the “Company” shall include any subsidiary employer, as applicable. Except as expressly provided herein, capitalized terms used herein shall have the meaning ascribed to such terms under the Plan.
KEY TERMS
Participant: |
|
Grant Date: |
|
Number of RSUs Granted at Target: |
|
Minimum and Maximum Award: |
0% to 200% of Target RSUs |
Performance Period: |
January 1, 2026 – December 31, 2028 |
Vesting Schedule and Vesting Date: |
Subject to and conditioned upon Participant’s continued employment or service with the Company through the last day of the Performance Period the (“Vesting Date”), and further subject to the terms and conditions of this Agreement and the Plan, the RSUs shall vest and become nonforfeitable on the Vesting Date based on the calculation of the Settlement Amount (which shall be calculated based on achievement of performance goals set forth in Exhibit 1). The Company may, in its discretion, adjust Participant’s Settlement Amount (from 0% to 200%) after consideration of other business factors, including overall performance of the Company and Participant’s contribution. Notwithstanding the foregoing vesting conditions, the RSUs shall be subject to accelerated vesting in certain circumstances as provided in this Agreement. |
|
|
1
Termination of Employment or Service; Retirement; Acceleration |
Any unvested RSUs outstanding as of Participant’s termination of employment or service will be forfeited, except as otherwise provided in this Agreement. In the event of Participant’s termination of employment or service due to death or disability (as defined by Section 409A of the Code or, if required, by applicable local law), Participant shall immediately vest in the unvested RSUs, and such vested RSUs will be settled between January 1st and March 15th of the calendar year following the Vesting Date set forth above in these Key Terms (regardless of the actual date of termination due to Participant’s death or disability). In the event of Participant’s Qualified Retirement, Participant shall immediately vest in a prorated portion of the RSUs eligible to vest during the Performance Period. The number of RSUs that vest shall be determined by multiplying the Award by a fraction, the numerator of which is the number of full months of service Participant completes of the Performance Period and the denominator of which is 36. Such vested RSUs will be settled between January 1st and March 15th of the calendar year following the Vesting Date (regardless of the actual date of termination due to Participant’s Qualified Retirement). In the event of the earlier to occur of (i) a Change in Control if the successor or surviving company does not assume, substitute or continue the Award on substantially similar terms or with substantially equivalent benefits (as determined by the Committee prior to the Change in Control) or the stock of the successor or surviving company following a Change in Control is not listed on the New York Stock Exchange or the NASDAQ Stock Market, or (ii) during the 24-month period following a Change in Control, the termination of Participant’s employment or service by the Company or its successor or surviving company without Cause (as defined in the General Terms) or due to a Constructive Termination (as defined in the General Terms), then, in each case, Participant shall immediately vest in the unvested RSUs, and such vested RSUs will be settled within thirty (30) days of the Change in Control or employment termination date, as applicable (the “Accelerated Vesting Date”). A termination of employment under clause (ii) of the preceding sentence is referred to under this Agreement as a “Qualified Termination”. |
2
Settlement Amount |
The Settlement Amount shall be calculated as follows: (i) upon the occurrence of Participant’s death or disability, the Settlement Amount shall be equal to the greater of (x) 100% of the number of RSUs specified in Section 1 above, or (y) the amount calculated pursuant to Section (iii) below if occurring after a Change in Control; (ii) upon the occurrence of a Qualified Retirement, the Settlement Amount shall be calculated as set forth in Exhibit 1 hereto as if Participant had remained employed by the Company for the entire Performance Period and pro-rated based on the Qualified Retirement date as described above in these Key Terms; except, that, if such Qualified Retirement occurs following a Change in Control, the Settlement Amount shall be calculated as set forth in paragraph (iii) below and pro-rated based on the Qualified Retirement date as described above in these Key Terms; and (iii) upon or following the occurrence of a Change in Control, the Settlement Amount for all purposes under this Agreement will be the greater of (x) the Target RSUs, and (y) the amount calculated based on the Company’s actual performance calculated from the Performance Period start date until the date of the occurrence of the Change in Control, as determined by the Committee in its sole discretion immediately prior to the Change in Control. |
Settlement Date |
On or before March 15th of the calendar year immediately following the applicable Vesting Date; provided, however, that (i) if vesting accelerates due to the termination of Participant’s employment or service due to death or disability or Qualified Retirement, the Settlement Date shall be between January 1st and March 15th of the calendar year immediately following the Vesting Date, and (ii) if vesting accelerates due to a Qualified Termination within 24 months following a Change in Control or the occurrence of a Change in Control (if the successor or surviving company does not assume, substitute or continue the Award) or the stock of the successor or surviving company no longer being listed on the New York Stock Exchange or the NASDAQ Stock Market, the Settlement Date shall be within thirty (30) days of the Accelerated Vesting Date. In no event may any Settlement Date be accelerated except in accordance with Section 409A of the Code or applicable local law. |
3
Form of Settlement |
One (1) Share for each vested RSU; provided, however, that the RSUs may be settled in the form of cash to the extent settlement in Shares (i) is not standard Company practice in Participant’s country of employment or service, (ii) is prohibited under applicable laws, (iii) would require Participant, the Company or, if different, the Affiliate that employs Participant to obtain the approval of any governmental and/or regulatory body in Participant’s country of residence (and country of employment or service, if different), or (iv) is administratively burdensome. |
4
EXHIBIT 10(b)
GENERAL TERMS
Award; VESTING; forfeiture AND SETTLEMENT
1.3 Termination of Employment or Service; Change in Control.
6
TAXATION AND TAX WITHHOLDING
7
RESTRICTIVE COVENANTS
8
9
OTHER PROVISIONS
10
11
12
13
14
15
IN WITNESS WHEREOF, the Company and Participant have duly executed this Agreement as of the Grant Date above.
CTS CORPORATION
By:
Name:
Title:
PARTICIPANT
Name:
16
EXHIBIT 1
PERFORMANCE GOALS
The Performance Goals are based on two metrics, with a Relative Total Stockholder Return modifier as noted below:
3-year Sales Growth |
<15% |
≥15% |
≥18% |
≥21% |
≥24% |
Award |
0% |
50% |
100% (Target) |
150% |
200% (Maximum) |
3-year Operating Cash Flow |
<$250,000,000 |
≥$250,000,000 |
≥$310,000,000 |
≥$330,000,000 |
≥$350,000,000 |
Award |
0% |
50% |
100% (Target) |
150% |
200% (Maximum) |
For purposes of calculating Three-Year Relative Total Stockholder Return (rounding shall be to the nearest tenth of a percent, with all hundredths of a percent equal to or greater than five rounded up to the nearest tenth of a percent):
Exhibit 1 – Performance Goals – Page 1
For purposes of this calculation, the Peers are as follows, subject to adjustment as described below.
Peer Group (19 Peers) |
||
NAME |
SYMBOL |
STOCK EXCHANGE |
Badger Meter, Inc. |
BMI |
New York Stock Exchange
|
Bel Fuse, Inc. |
BELFA |
Nasdaq
|
Diodes Incorporated |
DIOD |
Nasdaq
|
Dorman Products, Inc. |
DORM |
Nasdaq |
ESCO Technologies Inc |
ESE |
New York Stock Exchange
|
FARO Technologies Inc |
FARO |
Nasdaq
|
GenTex Corporation |
GNTX |
Nasdaq Global Select Market
|
Gentherm, Inc. |
THRM |
Nasdaq
|
Kimball Electronics, Inc |
KE |
Nasdaq
|
Knowles Corporation |
KN |
New York Stock Exchange
|
LittelFuse, Inc. |
LFUS |
Nasdaq
|
Materion Corp. |
MTRN |
New York Stock Exchange
|
Mercury Systems, Inc. |
MRCY |
Nasdaq Global Select Market |
Exhibit 1 – Performance Goals – Page 2
|
|
|
Methode Electronics, Inc. |
MEI |
New York Stock Exchange
|
PAR Technology Corporation |
PAR |
New York Stock Exchange
|
Rogers Corporation |
ROG |
New York Stock Exchange
|
Silicon Laboratories Inc. |
SLAB |
Nasdaq Global Select Market
|
Stoneridge, Inc. |
SRI |
New York Stock Exchange
|
Vishay Precision Group, Inc. |
VPG |
New York Stock Exchange
|
Peer Group Adjustment Protocol
Exhibit 1 – Performance Goals – Page 3
Exhibit 1 – Performance Goals – Page 4
ANNEX A: STATE-SPECIFIC TERMS
The Award is subject to the following additional terms, conditions and notices as set forth in this Annex A to the extent Participant resides and/or is employed in one of the states addressed herein. All defined terms contained in this Annex A shall have the same meaning as set forth in the Plan and this Agreement.
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ANNEX B: TERMS AND CONDITIONS APPLICABLE TO PARTICIPANTS OUTSIDE THE U.S.
The Award is subject to the following additional terms, conditions and notices as set forth in this Annex B to the extent Participant resides and/or is employed in one of the countries addressed herein. The information reflected herein is based on the securities, exchange control and other laws in effect in the respective countries as of the Grant Date. All defined terms as contained in this Annex B shall have the same meaning as set forth in the Plan and this Agreement. The Company and Committee may establish new or alternative terms and conditions to the extent they determine, in their discretion, that the application of such new or alternative terms and conditions is necessary or advisable in order to comply with local laws, rules and regulations, or to facilitate the operation and administration of the Award and the Plan.
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The following provision applies if the Participant is subject to exchange control restrictions and regulations in the People's Republic of China (“PRC”), including the requirements imposed by the
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China State Administration of Foreign Exchange (“SAFE”), as determined by the Company in its sole discretion:
Vesting. Notwithstanding anything to the contrary in the Plan or the Agreement, the RSUs will not vest and no Shares will be issued to the Participant unless and until all necessary exchange control or other approvals with respect to the RSUs under the Plan have been obtained from the SAFE or its local counterpart (“SAFE Approval”). In the event that SAFE Approval has not been obtained prior to any date(s) on which the RSUs are scheduled to vest in accordance with the vesting schedule set forth in the Agreement, the RSUs will not vest until the seventh day of the month following the month in which SAFE Approval is obtained (the “Actual Vesting Date”). If the Participant’s status as a service provider terminates prior to the Actual Vesting Date, the Participant shall not be entitled to vest in any portion of the RSUs and the RSUs shall be forfeited without any liability to the Company or any subsidiary or affiliate of the Company.
Exchange Control Requirements. Due to exchange control laws in the PRC, Shares acquired through RSU vestings must be maintained in the Morgan Stanley (or any successor broker designated by the Company) brokerage account until the Shares are sold. When the Shares are sold, all proceeds must be repatriated to the PRC and held in a special exchange control account maintained by the Company or one of the Company’s subsidiaries in the PRC. To the extent that the Participant holds any Shares on the date that is three (3) months (or such other period as may be required by the SAFE) after the date of the Participant’s termination of employment with the Company or one of the Company’s subsidiaries in the PRC, the Participant authorizes Morgan Stanley (or any successor broker designated by the Company) to sell such Shares on the Participant’s behalf at that time or as soon as is administratively practical thereafter. The Participant understands and agrees that the Company's designated broker is under no obligation to arrange for the sale of the Shares at any particular price. Upon the sale of the Shares, the Company agrees to pay the Participant the cash proceeds from the sale, less any brokerage fees or commissions and subject to any obligation to satisfy Tax-Related Items.
The Participant further is required to repatriate to the PRC any dividends or dividend equivalents paid to the Participant in relation to RSUs through a special exchange control account established by the Company or one of the Company’s subsidiaries in the PRC. The Participant hereby agrees that any cash proceeds from the Participant’s participation in the Plan may be transferred to such special account prior to being delivered to the Participant.
The Participant also understands and agrees that there will be a delay between the date the Shares are sold and the date the cash proceeds are distributed to the Participant. The Participant agrees to bear any currency fluctuation risk between the time the Shares are sold and the time the cash proceeds are distributed to the Participant through the special account described above. The Participant further agrees to comply with any other requirements that may be imposed by the Company in the future in order to facilitate compliance with exchange control requirements in the PRC
.
Tax Liability. Taxes are due at the time of vesting of the RSUs. The Participant understands and agrees that Tax-Related Items may be taken by the Employer from the Participant’s salary or other cash compensation.
Danish Stock Option Act. By participating in the Plan, the Participant acknowledges that he or she received an Employer Statement translated into Danish, which is being provided to comply with the Danish Stock Option Act, as amended effective January 1, 2019, and is attached hereto as Appendix C.
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Foreign Asset / Account Reporting Information. If the Participant establishes an account holding Shares or cash outside Denmark, the Participant must report the account to the Danish Tax Administration. The form which should be used in this respect can be obtained from a local bank.
Foreign Asset / Account Reporting Information. The Participant will be required to report details of any assets held outside Japan as of December 31st to the extent such assets have a total net fair market value exceeding ¥50,000,000. This report is due by March 15th each year. The Participant should consult with his or her personal tax advisor as to whether the reporting obligation applies to him or her and whether the requirement extends to any outstanding RSUs or Shares acquired under the Plan.
Acknowledgment of the Agreement. By participating in the Plan, Participant acknowledges that the Participant has received a copy of the Plan, has reviewed the Plan in its entirety and fully understands and accepts all provisions of the Plan. The Participant further acknowledges that the Participant has read and expressly approves the terms and conditions set forth in the Agreement, in which the following is clearly described and established: (i) the Participant’s participation in the Plan does not constitute an acquired right; (ii) the Plan and the Participant’s participation in the Plan are offered by the Company on a wholly discretionary basis; (iii) the Participant’s participation in the Plan is voluntary; and (iv) the Company and its subsidiaries are not responsible for any decrease in the value of the underlying Shares.
Labor Law Policy and Acknowledgment. By participating in the Plan, the Participant expressly recognizes that CTS Corporation, with registered offices at 4925 Indiana Avenue, Lisle, IL. 60532 U.S.A., is solely responsible for the administration of the Plan and that the Participant’s participation in the Plan and acquisition of Shares does not constitute an employment relationship between the Participant and the Company since the Participant is participating in the Plan on a wholly commercial basis. Based on the foregoing, the Participant expressly recognizes that the Plan and the benefits that the Participant may derive from participation in the Plan do not establish any rights between the Participant and the Company and do not form part of the employment conditions and/or benefits provided by the Company and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of the Participant's employment.
The Participant further understands that the Participant’s participation in the Plan is as a result of a unilateral and discretionary decision of the Company; therefore, the Company reserves the absolute right to amend and/or discontinue the Participant's participation at any time without any liability to the Participant.
Finally, the Participant hereby declares that Participant does not reserve any action or right to bring any claim against the Company for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and the Participant therefore grants a full and broad release to the Company, its subsidiaries, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.
Reconocimiento del Contrato. Al participar en el Plan, usted reconoce que ha recibido una copia del Plan, que ha revisado el Plan en su totalidad, y que entiende y acepta en su totalidad, todas y cada una de las disposiciones del Plan. Asimismo reconoce que ha leído y aprueba expresamente los términos y condiciones señalados en el párrafo titulado Naturaleza de la Oferta en el Convenio, en lo que claramente se describe y establece lo siguiente: (i) su participación en el Plan no constituye un derecho adquirido; (ii) el Plan y su participación en el Plan son ofrecidos por la Compañía sobre una base completamente discrecional;
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(iii) su participación en el Plan es voluntaria; y (iv) la Compañía y sus afiliadas no son responsables de ninguna por la disminución en el valor de las Acciones subyacentes
.
Política de Legislación Laboral y Reconocimiento. Al participar en el Plan, usted reconoce expresamente que CTS Corporation., con oficinas registradas en 4925 Indiana Avenue, Lisle, IL. 60532 EE.UU, es la única responsable por la administración del Plan, y que su participación en el Plan, así como la adquisición de las Acciones, no constituye una relación laboral entre usted y la Compañía, debido a que usted participa en el plan sobre una base completamente mercantil. Con base en lo anterior, usted reconoce expresamente que el Plan y los beneficios que pudiera obtener por su participación en el Plan, no establecen derecho alguno entre usted y la Compañía, y no forman parte de las condiciones y/o prestaciones laborales que la Compañía ofrece, y que las modificaciones al Plan o su terminación, no constituirán un cambio ni afectarán los términos y condiciones de su relación laboral.
Asimismo usted entiende que su participación en el Plan es el resultado de una decisión unilateral y discrecional de la Compañía; por lo tanto, la Compañía se reserva el derecho absoluto de modificar y/o suspender su participación en cualquier momento, sin que usted incurra en responsabilidad alguna.
Finalmente, usted declara que no se reserva acción o derecho alguno para interponer reclamación alguna en contra de la Compañía, por concepto de compensación o daños relacionados con cualquier disposición del Plan o de los beneficios derivados del Plan, y por lo tanto, usted libera total y ampliamente de toda responsabilidad a la Compañía, a sus afiliadas, sucursales, oficinas de representación, sus accionistas, funcionarios, agentes o representantes legales, con respecto a cualquier reclamación que pudiera surgir.
Securities Law Information. The securities being offered or sold herein have not been registered with the Philippines Securities and Exchange Commission (“PSEC”) under its Securities Regulation Code (the “SRC”).
The grant of RSUs is being made pursuant to an exemption from registration under Section 10.2 of the SRC that has been approved by the PSEC.
The Participant should be aware of the risks of participating in the Plan, which include (without limitation) the risk of fluctuation in the price of the Shares on the New York Stock Exchange (“NYSE”) and the risk of currency fluctuations between the U.S. Dollar and his or her local currency. In this regard, the Participant should note that the value of any Shares he or she may acquire under the Plan may decrease, and fluctuations in foreign exchange rates between his or her local currency and the U.S. Dollar may affect the value of the Shares or any amounts due to the Participant pursuant to the vesting of the RSUs or the subsequent sale of any Shares acquired by the Participant. The Company is not making any representations, projections or assurances about the value of the Shares now or in the future.
For further information on risk factors impacting the Company’s business that may affect the value of the Shares, the Participant should refer to the risk factors discussion in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are filed with the U.S. Securities and Exchange Commission and are available online at www.sec.gov, as well as on the Company’s website at http://investors.ctscorp.com/financials/sec-filings/default.aspx
The Participant should also note that the sale or disposal of Shares acquired under the Plan may be subject to certain restrictions under Philippines securities laws. Those restrictions should not apply if the offer and resale of Shares takes place outside of the Philippines through the facilities of a stock exchange on which
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the Shares are listed. The Shares are currently listed on the NYSE. The Company’s designated broker should be able to assist the Participant in the sale of Shares on NYSE.
If the Participant has questions with regard to the application of Philippines securities laws to the disposal or sale of Shares acquired under the Plan the Participant should consult with his or her legal advisor.
Foreign Asset/Account Reporting Information. If the Participant maintains bank or brokerage accounts holding cash and foreign securities (including Shares) outside of Poland, the Participant will be required to report information to the National Bank of Poland on transactions and balances in such accounts if the value of such cash and securities exceeds PLN 7,000,000. If required, such reports must be filed on a quarterly basis on special forms available on the website of the National Bank of Poland.
Exchange Control Information. The transfer of funds in excess of a certain threshold (currently €15,000, unless the transfer of funds is considered to be connected with the business activity of an entrepreneur, in which case a lower threshold may apply) into or out of Poland must be made through a bank account in Poland. The Participant understands that he or she is required to store all documents connected with any foreign exchange transactions for a period of five years, as measured from the end of the year in which such transaction occurred. The Participant should consult with his or her personal legal advisor to determine what he or she must do to fulfill any applicable reporting/exchange control duties.
Securities Law Information. The RSUs were granted to the Participant pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Agreement and the Plan have not been lodged or registered as a prospectus with the Monetary Authority of Singapore. The Participant should note that the Participant’s RSUs are subject to section 257 of the SFA and the Participant will not be able to make any subsequent sale in Singapore, or any offer of such subsequent sale of the Shares unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Chief Executive Officer and Director Notification. If the Participant is the Chief Executive Officer (“CEO”) or a director, associate director or shadow director of a subsidiary or other related company in Singapore, the Participant is subject to certain notification requirements under the Singapore Companies Act. Among these requirements is an obligation to notify the Singapore subsidiary in writing when the Participant receives an interest (e.g., RSUs, Shares) in the Company or any related company. In addition, the Participant must notify the Singapore subsidiary when the Participant sells Shares of the Company or any related company (including when the Participant sells Shares acquired under the Plan). These notifications must be made within two (2) business days of (i) acquiring or disposing of any interest in the Company or any related company, or (ii) any change in a previously-disclosed interest (e.g.upon vesting of the RSUs or when Shares are subsequently sold). In addition, a notification must be made of the Participant’s interests in the Company or any related company within two (2) business days of becoming a CEO or director, associate director, or shadow director.
Data Privacy. The Participant acknowledges that he or she has read and understands the terms regarding collection, processing and transfer of Data contained in the Privacy Notice in Section 4.22 of the Agreement
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and Section II(1) of this Annex B and agrees that, upon request of the Company, the Participant will provide any executed data privacy consent form to the Company (or any other agreements or consents that may be required by the Company) that the Company may deem necessary to obtain under the data privacy laws in Participant’s country, either now or in the future. The Participant understands he or she will not be able to participate in the Plan if the Participant fails to execute any such consent or agreement.
Securities Law Information. The RSUs and participation in the Plan is made available only to employees of the Company and its subsidiaries. It is not a public offer of securities by a Taiwanese company. Therefore, it is exempt from registration in Taiwan.
Exchange Control Information. Individuals may acquire foreign currency (including proceeds from the sale of Shares) into Taiwan up to US$5,000,000 per year without justification. There is no need to aggregate all remittances into Taiwan when calculating the limitation. If the transaction amount is TWD$500,000 or more in a single transaction, the Participant must submit a Foreign Exchange Transaction Form and also provide supporting documentation to the satisfaction of the remitting bank.
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EXHIBIT (31)(a)
CERTIFICATION
I, Kieran O’Sullivan, certify that:
Date: April 29, 2026 |
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/s/ Kieran O’Sullivan |
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Kieran O’Sullivan |
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Chairman, President and Chief Executive Officer |
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EXHIBIT (31)(b)
CERTIFICATION
I, Ashish Agrawal, certify that:
Date: April 29, 2026 |
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/s/Ashish Agrawal |
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Ashish Agrawal |
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Vice President and Chief Financial Officer |
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EXHIBIT (32)(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
Date: April 29, 2026 |
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/s/ Kieran O’Sullivan |
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Kieran O’Sullivan |
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Chairman, President and Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to CTS Corporation and will be retained by CTS Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
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EXHIBIT (32)(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of CTS Corporation (the Company) on Form 10-Q for the quarter ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
Date: April 29, 2026 |
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/s/Ashish Agrawal |
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Ashish Agrawal |
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Vice President and Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to CTS Corporation and will be retained by CTS Corporation and furnished to the Securities and Exchange Commission or its staff upon request.
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