CTS CORP

Previous wording

(in thousands of dollars, except percentages and per share amounts)

Current wording

(in thousands, except percentages and per share amounts)

Previous wording

Selling, general and administrative (“SG&A”) expenses were $23,623 or 18.8% of net sales in the first quarter of 2025, versus $22,260 or 17.7% of net sales in the first quarter of 2024. The increase in SG&A expenses as a percentage of net sales was primarily driven by higher depreciation and amortization expense in the first quarter of 2025. The SyQwest acquisition added additional depreciation and amortization expense of $1,378.

Current wording

Selling, general and administrative (“SG&A”) expenses were $23,077 or 17.1% of net sales in the second quarter of 2025 versus $21,332 or 16.4% of net sales in the second quarter of 2024. The increase in SG&A expenses was primarily driven by higher depreciation and amortization expense in the second quarter of 2025 from the SyQwest acquisition.

Previous wording

Research and development (“R&D”) expenses were $6,190 or 4.9% of net sales in the first quarter of 2025 compared to $6,601 or 5.2% of net sales in the first quarter of 2024. Our R&D expenses are in line with our commitment to continue investing in research and product development to drive organic growth.

Current wording

Research and development (“R&D”) expenses were $6,326 or 4.7% of net sales in the second quarter of 2025 compared to $6,086 or 4.7% of net sales in the comparable quarter of 2024. Our R&D expenses are in line with our commitment to continue investing in research and product development to drive organic growth.

Previous wording

Restructuring charges were $451 or 0.4% of net sales in the first quarter of 2025 compared to $1,693 or 1.3% of net sales in the first quarter of 2024. The restructuring charges in the quarter ended March 31, 2025 were primarily related to headcount reductions in response to softening demand in the transportation end market. 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.

Current wording

Restructuring charges were $297 or 0.2% of net sales in the second quarter of 2025 compared to $1,190 or 0.9% of net sales in the second quarter of 2024. The restructuring charges in the quarter ended June 30, 2025 were primarily related to headcount reductions in response to softening demand in the transportation end market. 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.

Previous wording

Our effective income tax rate was 17.1% and 18.6% in the first quarters of 2025 and 2024, respectively. The decrease in the effective income tax rate is primarily attributed to a change in mix of earnings taxed at lower rates and the establishment of valuation allowances on certain tax credits in the first quarter of 2024.

Current wording

Our effective income tax rate was 19.4% and 17.2% in the second quarters of 2025 and 2024, respectively. The increase in the effective income tax rate is primarily attributable to a mix of earnings taxed at higher rates.

Previous wording

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.

Current wording

We have historically 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.

Previous wording

Cash and cash equivalents were $90,288 at March 31, 2025, and $94,334 at December 31, 2024, of which $89,210 and $92,944, respectively, were held outside the United States. Total long-term debt was $86,700 as of March 31, 2025 and $92,300 as of December 31, 2024.

Current wording

Cash and cash equivalents were $99,440 at June 30, 2025, and $94,334 at December 31, 2024, of which $98,785 and $92,944, respectively, were held outside the United States. Total long-term debt was $88,000 as of June 30, 2025 and $92,300 as of December 31, 2024.

Previous wording

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.

Current wording

Net cash provided by operating activities was $43,870 during the six months ended June 30, 2025. Components of net cash provided by operating activities included net earnings of $31,891, depreciation and amortization expense of $17,045, other net non-cash items of $838, and a net cash outflow from changes in assets and liabilities of $5,904.

Previous wording

Net cash provided by operating activities was $18,311 during the three months ended March 31, 2024. Components of net cash provided by operating activities included net earnings of $11,119, depreciation and amortization expense of $7,325, other net non-cash items of $132, and a net cash outflow from changes in assets and liabilities of $265.

Current wording

Net cash provided by operating activities was $37,940 during the six months ended June 30, 2024. Components of net cash provided by operating activities included net earnings of $25,826, depreciation and amortization expense of $14,651, other net non-cash items of $629, and a net cash outflow from changes in assets and liabilities of $3,166.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $16,308. The net cash outflow was the result of treasury stock purchases of $11,958 (net of excise tax), dividends paid of $1,233, and taxes paid on behalf of equity award participants of $3,117.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 was $32,351. The net cash outflow was the result of treasury stock purchases of $22,995, net cash payments of long-term debt of $4,300, taxes paid on behalf of equity award participants of $2,655, and dividends paid of $2,401.

Previous wording

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.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $32,059. The net cash outflow was the result of treasury stock purchases of $22,892, net cash used in the paydown of long-term debt of $2,500, taxes paid on behalf of equity award participants of $3,131, dividends paid of $2,460, and payments of contingent consideration of $1,076.

Previous wording

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility availability to $400,000, which may be increased by $200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026, (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sub limits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility. This new unsecured credit facility replaced the prior $300,000 unsecured credit facility, which would have expired on February 12, 2024.

Current wording

On December 15, 2021, we entered into a second amended and restated five-year credit agreement with a group of banks (the “Revolving Credit Facility”) to (i) increase the total credit facility availability to $400,000, which may be increased by $200,000 at the request of the Company, subject to the administrative agent's approval, (ii) extend the maturity of the Revolving Credit Facility from February 12, 2024 to December 15, 2026, (iii) replace LIBOR with SOFR as the primary reference rate used to calculate interest on the loans under the Revolving Credit Facility, (iv) increase available sub limits for letters of credit, and swingline loans as well as providing for additional alternative currency borrowing capabilities, and (v) modify the financial and non-financial covenants to provide the Company additional flexibility. This new unsecured credit facility replaced the prior $300,000 unsecured credit facility, which would have expired February 12, 2024.

Previous wording

The Revolving Credit Facility includes a swingline sublimit of $20,000 and a letter of credit sub limit of $20,000. 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, 2025.

Current wording

The Revolving Credit Facility includes a swing-line sublimit of $20,000 and a letter of credit sublimit of $20,000. We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The commitment fee ranges from 0.175% to 0.25% based on our net leverage ratio. We were in compliance with all debt covenants at June 30, 2025.

Previous wording

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, 2024. During and as of the three months ended March 31, 2025, there were no significant changes in the application of critical accounting policies or estimates.

Current wording

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, 2024. During and as of the three and six months ended June 30, 2025, there were no significant changes in the application of critical accounting policies or estimates.

Previous wording

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

Current wording

No other customer accounted for 10% or more of total net sales during these periods. We continue to focus on broadening our customer base to diversify our non-transportation end market exposure.

Previous wording

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; changes in the economy generally, including inflationary and/or recessionary conditions and increased tariffs, and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions including, without limitation the integration of SyQwest; 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 protec…

Excerpt shortened here; the source contains the full paragraph.

Current wording

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; changes in the economy generally, including inflationary and/or recessionary conditions and increased tariffs, and in respect to the business in which CTS operates; unanticipated issues in integrating acquisitions including, without limitation the integration of SyQwest; the funding of contracts by the US 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 …

Excerpt shortened here; the source contains the full paragraph.