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What changed in CTS CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CTS CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+198 added−183 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-23)

Top changes in CTS CORP's 2024 10-K

198 paragraphs added · 183 removed · 166 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

41 edited+5 added−3 removed16 unchanged
Biggest changeWe maintain sales offices in China, Czech Republic, Denmark, Germany, Japan, Singapore, Taiwan, and the United States. Approximately 91% of 2023 net sales were attributable to our sales engineers. CTS CORPORATION 4 Table of Contents Our sales engineers generally service our largest customers with application-specific products. A vast majority of our products are engineered solutions.
Biggest changeMARKETING AND DISTRIBUTION Sales and marketing to customers is accomplished through our sales engineers, independent manufacturers' representatives, and distributors. We maintain sales offices in China, Czech Republic, Denmark, Germany, Japan, Singapore, Taiwan, and the United States. Approximately 90% of 2024 net sales were attributable to our sales engineers.
This includes the identification of key positions, assessment of internal talent and potential successors and plans for talent acquisition and development. Each year, employees are expected to have defined performance objectives so that they focus time and resources appropriately, understand their impact to the success of our strategy, and understand how their performance will be assessed.
This includes the identification of key positions, assessment of internal talent and potential successors and plans for talent acquisition and development. Each year, employees are expected to have defined performance objectives so that they focus time and resources appropriately, understand their impact on the success of our strategy, and understand how their performance will be assessed.
The price and availability of raw materials and manufactured components is subject to change due to, among other things, new laws and regulations, global economic and political events including strikes, and public health and safety concerns.
The price and availability of raw materials and manufactured components is subject to change due to, among other things, new laws and regulations, global economic and political events including strikes, climate events, and public health and safety concerns.
Most of our product lines encounter significant global competition. The number of competitors varies from product line to product line. No one competitor competes with us in every product line, but some competitors are larger and more diversified than we are. Some customers have reduced or plan to reduce their number of suppliers, while increasing their volume of purchases.
Most of our product lines encounter significant global competition. The number of competitors varies across product line. No one competitor competes with us in every product line, but some competitors are larger and more diversified than we are. Some customers have reduced or plan to reduce their number of suppliers, while increasing their volume of purchases.
REVENUES AND OPERATIONS Our net sales to customers originating from our non-U.S. operations as a percentage of total net sales were as follows: Years Ended December 31, 2023 2022 2021 Net sales from non-U.S. operations 45.0% 44.4% 42.0% We believe the business risks to our non-U.S. operations, though substantial, are normal risks for global businesses.
REVENUES AND OPERATIONS Our net sales to customers originating from our non-U.S. operations as a percentage of total net sales were as follows: Years Ended December 31, 2024 2023 2022 Net sales from non-U.S. operations 42.0% 45.0% 44.4% We believe the business risks to our non-U.S. operations, though substantial, are normal risks for global businesses.
Investors and others should note that we announce material financial information to our investors using the Investors section of our website ( ctscorp.com/investors ), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media and blogs to communicate with our investors and the public about the Company, our services and other issues.
Investors and others should note that we announce material financial information to our investors using the Investors section of our website ( ctscorp.com/investors ), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media and blogs to communicate with our investors and the public about the Company, our services and other matters.
PATENTS, TRADEMARKS, AND LICENSES In 2023, CTS continued its practice of innovation and protecting its intellectual property by obtaining patents in the U.S. and abroad. CTS’s patents cover inventions relating to products that its engineers have designed, as well as for methods and technology related to CTS’s manufacturing processes.
PATENTS, TRADEMARKS, AND LICENSES In 2024, CTS continued its practice of innovation and protecting its intellectual property by obtaining patents in the U.S. and abroad. CTS’s patents cover inventions relating to products that its engineers have designed, as well as for methods and technology related to CTS’s manufacturing processes.
Information with respect to the Company’s Directors and corporate governance policies and practices may be found in our definitive proxy statement to be delivered to shareholders in connection with our 2024 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ADDITIONAL INFORMATION We are incorporated in the State of Indiana.
Information with respect to the Company’s Directors and corporate governance policies and practices may be found in our definitive proxy statement to be delivered to shareholders in connection with our 2025 Annual Meeting of Shareholders. Such information is incorporated herein by reference. ADDITIONAL INFORMATION We are incorporated in the State of Indiana.
Additional information regarding the Company’s sales by geographic area and long-lived tangible assets in different geographic areas is included in Note 20 - "Geographic Data," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
Additional information regarding the Company’s sales by geographic area and long-lived tangible assets in different geographic areas is included in Note 21, "Geographic Data," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
HUMAN CAPITAL MANAGEMENT AND OUR CULTURE CTS is a leading provider of sensing and motion devices as well as connectivity components and we believe our employees are a critical asset to meeting our mission of enabling an intelligent and seamless world.
HUMAN CAPITAL MANAGEMENT AND OUR CULTURE CTS is a leading provider of sensing and motion devices as well as connectivity components and we believe our employees are a critical asset to supporting our mission of enabling an intelligent and seamless world.
D’Angelo was a member of the International Commercial and Trade Practice Group of Baker McKenzie, LLP from March 2019, and served as Vice President, Deputy General Counsel & Chief Compliance Officer of Fortune Brands Home & Security, Inc., a leading home and security products company, from May 2015 and, prior to that, served in several senior roles with McDonald’s Corporation.
D’Angelo was a member of the International Commercial and Trade Practice Group of Baker McKenzie, LLP, an international law firm, from March 2019, and served as Vice President, Deputy General Counsel & Chief Compliance Officer of Fortune Brands Home & Security, Inc., a leading home and security products company, from May 2015 and, prior to that, served in several senior roles with McDonald’s Corporation.
We work together, drawing on our strengths, guided by our culture, which is built on the following core values: • Play to Win – being ambitious, seizing opportunities, challenging to get the best results, acting with humility, intelligence, and integrity • Responsiveness – being nimble and acting fast, understanding customers’ needs, respecting the views and needs of others, working with a sense of urgency • Simplicity – being straightforward, easy to deal with, reducing bureaucracy and complexity, delivering solutions efficiently and effectively • Solution Oriented – staying curious and resourceful, understanding and embracing challenges, finding new and better ways to work together CTS CORPORATION 6 Table of Contents We have a global business, and our employees reflect the diversity of our geographic footprint.
We work together, drawing on our strengths, guided by our culture, which is built on the following core values: • Play to Win – being ambitious, seizing opportunities, challenging to get the best results, acting with humility, intelligence, and integrity • Responsiveness – being nimble and acting fast, understanding customers’ needs, respecting the views and needs of others, working with a sense of urgency • Simplicity – being straightforward, easy to deal with, reducing bureaucracy and complexity, delivering solutions efficiently and effectively • Solution Oriented – staying curious and resourceful, understanding and embracing challenges, finding new and better ways to work together We have a global business, and our employees reflect the diversity of our geographic footprint.
Ashish Agrawal – 53 – Vice President and Chief Financial Officer. On November 11, 2013, Mr. Agrawal was elected Vice President and Chief Financial Officer of CTS. Mr. Agrawal joined CTS in June 2011 as Vice President, Treasury and Corporate Development, and was elected as Treasurer on September 1, 2011. Before joining CTS, Mr.
Ashish Agrawal – 54 – Vice President and Chief Financial Officer. On November 11, 2013, Mr. Agrawal was elected Vice President and Chief Financial Officer of CTS. Mr. Agrawal joined CTS in June 2011 as Vice President, Treasury and Corporate Development, and was elected as Treasurer on September 1, 2011. Before joining CTS, Mr.
Each year managers are expected to complete a mid-year and year-end performance evaluations with their employees. Employee Compensation We strive to align compensation with an external group of peer companies in our industry and/or similar to our size while also maintaining consistency and equity within our organization.
Each year managers are expected to complete mid-year and year-end performance evaluations with their employees. Employee Compensation We strive to align employee compensation with the median compensation of an external group of peer companies in our industry and/or similar to our size while also maintaining consistency and equity within our organization.
These risks include currency controls and changes in currency exchange rates, longer collection cycles, political and fulfilment risks, economic downturns and inflation, government regulations, and expropriation. See “Item 1A. Risk Factors” for additional discussion of these and other risks that our business faces. Our non-U.S. manufacturing facilities are located in China, Czech Republic, Denmark, Mexico, Philippines, Poland, and Taiwan.
These risks include currency controls and changes in currency exchange rates, longer collection cycles, political and fulfillment risks, economic downturns and inflation, government regulations, and expropriation. See Item 1A. "Risk Factors” for additional discussion of these and other risks that our business faces. Our non-U.S. manufacturing facilities are located in China, Czech Republic, Denmark, Mexico, Philippines, Poland, and Taiwan.
MAJOR CUSTOMERS Our net sales to significant customers as a percentage of total net sales were as follows: Years Ended December 31, 2023 2022 2021 Cummins, Inc. 15.0% 15.3% 15.0% Toyota Motor Corporation 12.5% 11.5% 12.4% We sell parts to these two transportation customers for certain vehicle platforms under purchase agreements that have program lifetime volume estimates and are subject to purchase orders issued from time to time.
MAJOR CUSTOMERS Our net sales to significant customers as a percentage of total net sales were as follows: Years Ended December 31, 2024 2023 2022 Toyota Motor Corporation 12.2% 12.5% 11.5% Cummins, Inc. 11.7% 15.0% 15.3% We sell parts to these two transportation customers for certain vehicle platforms under purchase agreements that have program lifetime volume estimates and are subject to purchase orders issued from time to time.
CTS Cares We recognize that we have a responsibility to be a positive influence in the communities in which we do business around the world, and CTS Cares is the platform that connects CTS employees to the causes that we care about. We have a rich history of philanthropy and CTS CORPORATION 7 Table of Contents community involvement.
CTS Cares We recognize that we have a responsibility to be a positive influence in the communities in which we do business around the world, and CTS Cares is the platform that connects CTS employees to the causes that we care about. We have a rich history of philanthropy and community involvement.
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 exposure. Changes in the level of our customers' orders have, in the past, had a significant impact on our operating results.
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 business. Changes in the level of our customers' orders may have a significant impact on our operating results.
Our employees routinely leverage their individual skills and capabilities to give back to their local communities. We value and are proud of the contributions that our employees make. CTS Cares supports our global community. EXECUTIVE OFFICERS OF THE COMPANY Executive Officers. The following persons serve as executive officers of CTS as of December 31, 2023.
Our employees routinely leverage their individual skills and capabilities to give back to their local communities. We value and are proud of the contributions that our employees make. EXECUTIVE OFFICERS OF THE COMPANY Executive Officers. The following persons serve as executive officers of CTS as of December 31, 2024.
Agrawal was with Dometic Group AB, a manufacturer of refrigerators, awnings and air conditioners, as Senior Vice President and Chief Financial Officer, Americas, beginning in 2007. Prior to that, Mr. Agrawal was with General Electric Co. in various positions beginning in December 1994. Scott D’Angelo – 53 – Vice President, General Counsel and Secretary. Mr.
Agrawal was with Dometic Group AB, a manufacturer of refrigerators, awnings and air conditioners, as Senior Vice President and Chief Financial Officer, Americas, beginning in 2007. Prior to that, Mr. Agrawal was with General Electric Company in various positions beginning in December 1994. Scott D’Angelo – 54 – Vice President, Chief Legal and Administrative Officer and Secretary. Mr.
Martin Baumeister – 57 – Senior Vice President. Mr. Baumeister joined CTS on January 14, 2020. Immediately prior to joining CTS, Mr. Baumeister served as Executive Director - Product Line Electronics Americas at Vitesco Technologies since October 2019. Prior to that role, Mr.
Martin Baumeister – 58 – Senior Vice President. Mr. Baumeister joined CTS on January 14, 2020. Immediately prior to joining CTS, Mr. Baumeister served as Executive Director - Product Line Electronics Americas at Vitesco Technologies Group AG, an automotive supplier, since October 2019. Prior to that role, Mr.
O’Sullivan is a member of the board of directors of LCI Industries, a supplier of engineered components for manufacturers of recreational vehicles, manufactured homes, marine applications, and for the related aftermarkets, serving as the chairperson of the risk committee, and as a member of the corporate governance, nominating and sustainability and audit committees.
O’Sullivan has been a member of the board of directors of LCI Industries (NYSE: LCII), a supplier of engineered components for manufacturers of recreational vehicles, manufactured homes, marine applications, and for related aftermarkets, and currently serves as the chair of the risk committee, and as a member of the corporate governance, nominating and sustainability and audit committees.
Product Description Transportation Industrial Medical Aerospace and Defense SENSE • • • • (Controls, Pedals, Piezo Sensing Products, Sensors, Switches, Transducers) CONNECT • • • (EMI/RFI Filters, Capacitors, Frequency Control Products, Resistors, RF filters) MOVE • • • (Piezo Microactuators, Rotary Actuators) The following table provides a breakdown of net sales by end-market as a percent of consolidated net sales: Industry 2023 2022 2021 Transportation 55% 52% 55% Industrial 24% 29% 27% Medical 12% 11% 9% Aerospace and Defense 9% 8% 9% % of consolidated net sales 100% 100% 100% In the above table, net sales to the telecommunications and information technology end markets are included in the industrial end-market for all periods presented.
Product Description Transportation Industrial Medical Aerospace and Defense SENSE • • • • (Controls, Pedals, Piezo Sensing Products, Sensors, Switches, Transducers) CONNECT • • • (EMI/RFI Filters, Capacitors, Frequency Control Products, Resistors, RF filters) MOVE • • • (Piezo Microactuators, Rotary Actuators) The following table provides a breakdown of net sales by end market as a percent of consolidated net sales: Industry 2024 2023 2022 Transportation 49% 55% 52% Industrial 23% 24% 29% Medical 14% 12% 11% Aerospace and Defense 14% 9% 8% % of consolidated net sales 100% 100% 100% The end market sales for 2022 were adjusted by immaterial amounts to align the classification of certain customers in connection with our acquisitions during that year with our enterprise-level end market information.
In addition, we also utilize the services of independent manufacturers' representatives for customers not serviced directly by our sales engineers. Independent manufacturers' representatives receive commissions from us. During 2023, approximately 3% of net sales were attributable to independent manufacturers' representatives. RAW MATERIALS We utilize a wide variety of raw materials and purchased parts in our manufacturing processes.
In addition, we also utilize the services of independent manufacturers' representatives for customers not serviced directly by our sales engineers. Independent manufacturers' representatives receive commissions from us in exchange for their services. During 2024, approximately 4% of net sales were attributable to independent manufacturers' representatives.
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 while also using independent manufacturers' representatives and distributors as an extension of our sales capability.
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 strive to create an inclusive workplace where everyone feels valued, respected, appreciated, and embraced because of their differences – a place where every employee can be themselves so they can reach their highest potential and help us achieve our business goals. Our employees must adhere to a Code of Ethics that sets standards for appropriate behavior.
Empowering our employees’ distinctive talents delivers customer value and advances our culture and engagement. We strive to create an inclusive workplace where everyone feels valued, respected, appreciated, and embraced because of their differences – a place where every employee can be themselves so they can reach their highest potential and help us achieve our business goals.
We design, manufacture, and sell a broad line of sensors, connectivity components, and actuators primarily to original equipment manufacturers ("OEMs") and tier one suppliers for the aerospace and defense, industrial, medical, and transportation markets. Our vision is to be a leading provider of sensing and motion devices as well as connectivity components, enabling an intelligent and seamless world.
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.
Health and Safety The safety and well-being of our employees is a priority and vital to our success. Our health and safety activities are overseen by our corporate environmental, health and safety function and are managed by employees in our locations, who coordinate on-site safety programs, resources, reporting and training.
Our health and safety activities are overseen by our corporate environmental, health and safety function and are managed by employees in our locations, who coordinate on-site safety programs, resources, reporting and training. Our employees are regularly trained on safety-related topics, and we monitor and measure the effectiveness of our programs at our locations.
The sales engineers work closely with major customers in designing and developing products to meet specific customer requirements. In 2023, independent distributors accounted for approximately 6% of net sales.
CTS CORPORATION 4 Table of Contents Our sales engineers generally service our largest customers with application-specific products. A vast majority of our products are engineered solutions. The sales engineers work closely with major customers in designing and developing products to meet specific customer requirements. In 2024, independent distributors accounted for approximately 6% of net sales.
Baumeister served as Executive Director Electronics Americas when Continental separated that subsidiary into an independent entity from July 2018, and served as Executive Director - Global Customer Head from February 2015.
Baumeister served as Executive Director Electronics Americas when Continental AG separated that subsidiary into an independent entity from July 2018, and served as Executive Director - Global Customer Head from February 2015. Pratik Trivedi – 46 – Senior Vice President. Mr. Trivedi joined CTS on April 29, 2024. Immediately prior to joining CTS, Mr.
We provide our employees with annual training on a variety of compliance-related topics including preventing, identifying and reporting any type of unlawful discrimination or unethical actions. A copy of our Code of Ethics is available for review in the investors section of our Company’s website at https://investors.ctscorp.com.
Our employees must adhere to a Code of Ethics that sets standards for appropriate behavior. We provide our employees with annual training on a variety of compliance-related topics including preventing, identifying and reporting any type of unlawful discrimination or unethical actions.
Name Age Positions and Offices Kieran O'Sullivan 61 President, Chief Executive Officer and Chairman of the Board Ashish Agrawal 53 Vice President and Chief Financial Officer Scott D’Angelo 53 Vice President, General Counsel and Secretary Martin Baumeister 57 Senior Vice President Kieran O’Sullivan – 61 – President, Chief Executive Officer and Chairman of the Board. Mr.
Name Age Positions and Offices Kieran O'Sullivan 62 President, Chief Executive Officer and Chairman of the Board CTS CORPORATION 7 Table of Contents Ashish Agrawal 54 Vice President and Chief Financial Officer Scott D’Angelo 54 Vice President, Chief Legal and Administrative Officer and Secretary Martin Baumeister 58 Senior Vice President Pratik Trivedi 46 Senior Vice President Kieran O’Sullivan – 62 – President, Chief Executive Officer and Chairman of the Board.
In the competitive environment in which we operate, employees need to replenish their knowledge and acquire new skills to do their jobs better. CTS provides growth and development opportunities through programs such as Education Reimbursement, Situational Leadership, Leadership Essentials, and the Accelerated Leadership Program. In addition, we have a mentorship program for key employees to leverage internal leadership and expertise.
CTS provides growth and development opportunities through programs such as Education Reimbursement, Situational Leadership, Leadership Essentials, and the Accelerated Leadership Program. In addition, we have a mentorship program for key employees to leverage internal leadership and expertise. Health and Safety The safety and well-being of our employees is a priority and vital to our success.
We engage with outside consulting firms to benchmark all of our employee compensation and benefits aligning to market median. Training and Development Employee development and company growth go hand in hand. At CTS, we focus our learning and development activities on areas that we believe will most effectively support the achievement of our business objectives.
Training and Development Employee development and company growth go hand in hand. At CTS, we focus our learning and development activities on areas that we believe will most effectively support the achievement of our business objectives. In the competitive environment in which we operate, employees need to replenish their knowledge and acquire new skills.
We have developed key recruitment and retention strategies that guide our human capital management approach as part of the overall management of our business.
A copy of our Code of Ethics is available for review in the investors section of our Company’s website at https://investors.ctscorp.com. We have developed key recruitment and retention strategies that guide our human capital management approach as part of the overall management of our business.
Below is a summary of our employees by location and gender as of December 31, 2023. North America 2,294 Asia 1,262 Europe 525 Total 4,081 Female 58 % Male 42 % CTS strives to foster an environment where all employees are respected and treated equally. Empowering our employees’ distinctive talents delivers customer value and advances our culture and engagement.
Below is a summary of our employees by location and gender as of December 31, 2024. North America 1,870 Asia 1,166 Europe 513 Total 3,549 Female 57 % Male 43 % CTS CORPORATION 6 Table of Contents CTS strives to foster an environment where all employees are respected and treated equally.
We have also licensed certain patents and our license and royalty income for 2023 was less than 1% of net sales.
Furthermore, CTS owns seven registered U.S. trademarks, most of which are also registered in jurisdictions throughout the world. We have also licensed certain patents and our license and royalty income for 2024 was less than 1% of net sales.
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.
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.
See the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Annual Report on Form 10-K for financial information regarding the Company. PRODUCTS BY MAJOR MARKETS Our products perform specific electronic functions for a given product family and are intended for use in products assembled by our customers. The following table identifies major products by industry.
PRODUCTS BY MAJOR MARKETS Our products perform specific electronic functions for a given product family and are intended for use in products assembled by our customers. The following table identifies major products by industry. Products are sold to industry OEMs, tier one suppliers, distributors and the U.S. Government.
O’Sullivan joined CTS on January 7, 2013. Before joining CTS, Mr. O’Sullivan served as Executive Vice President of Continental AG’s Global Infotainment and Connectivity Business and led the NAFTA Interior Division, having joined Continental AG, a global automotive supplier, in 2006. Mr.
Mr. O’Sullivan joined CTS on January 7, 2013 as President and Chief Executive Officer and was appointed Chairman of the Board in May 2014. Before joining CTS, from 2006 until 2012, Mr.
CTS obtained 23 patents in 2023, including four U.S. patents, 13 patents in Asia, and six patents in Europe. CTS currently owns approximately 285 patents worldwide including 131 active U.S. patents. We own seven registered U.S. trademarks, most of which are also registered in jurisdictions throughout the world.
CTS obtained 21 patents in 2024, including six U.S. patents, nine patents in Asia, and six patents in Europe. CTS currently owns approximately 275 patents worldwide including 134 active U.S. patents. CTS also has 57 existing patent applications that are currently being examined in the U.S., Europe, and Asia.
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Products are sold to several industry OEMs, tier one suppliers, and distributors.
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We also utilize independent manufacturers' representatives and distributors to extend our sales capability. See the Consolidated Financial Statements and Notes included in Part II, Item 8 of this Annual Report on Form 10-K for financial information regarding the Company.
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The end-market sales for 2022 were adjusted by immaterial amounts to align the classification of certain customers in connection with our recent acquisitions with our enterprise-level end market information. MARKETING AND DISTRIBUTION Sales and marketing to customers is accomplished through our sales engineers, independent manufacturers' representatives, and distributors.
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RAW MATERIALS We utilize a wide variety of raw materials and purchased parts in our manufacturing processes.
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Our employees are regularly trained on safety-related topics, and we monitor and measure the effectiveness of our programs at our locations.
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O’Sullivan served in several executive-level roles with Continental A.G., a global business focused on technology solutions and products for the transportation and mobility industries, first serving as Executive Vice President of the Global Infotainment and Connectivity business and later adding responsibility for its NAFTA Interior Division. From 2004 until 2006, Mr.
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O’Sullivan served as Corporate Vice President of Motorola’s Automotive business. Since 2015, Mr.
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Trivedi served as Vice President, North America for the mobility business of Eaton Corporation plc, a global power management company, since 2017. Prior to that role, Mr. Trivedi served in several key roles with Cummins, Inc.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf these technologies, systems, products or services are threatened, disputed, damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, or are subject to cybersecurity incidents, such as those involving denial of service attacks, ransomware, unauthorized access, malicious software, or other intrusions or disruptions, including by criminals, nation states or insiders, our business may be adversely impacted.
Biggest changeIf these technologies, systems, products or services are threatened, disputed, damaged, cease to function properly, are compromised due to employee or third-party contractor error, user error, malfeasance, system errors, or other vulnerabilities, technology malfunction, or as the result of events or circumstances of broader geographic impact (e.g., earthquake, storm, flood, epidemic, strike, act of war, civil unrest or terrorist act), or are subject to cybersecurity incidents, such as those involving denial-of-service attacks, ransomware, phishing or social engineering, unauthorized access, malicious software, or other intrusions or disruptions, including by criminals, nation states or insiders, our business may be adversely impacted.
We rely on our information technology systems and networks, including cloud-based systems, in connection with many of our business activities, some of which are managed directly by us, while others are managed by third-party service providers and are not under our direct control.
We rely on information technology systems and networks, including cloud-based systems, in connection with many of our business activities, some of which are managed directly by us, while others are managed by third-party service providers and are not under our direct control.
We rely on the internal processes and controls of third-party software and application vendors to maintain the security of all software code, systems, and data provided to or used by or on behalf of the Company.
We rely on the internal processes and controls of third-party software, systems, and application vendors to maintain the security of all software code, systems, and data provided to or used by or on behalf of the Company.
Such matters, even those that are ultimately non-meritorious, can be complex, costly, and highly disruptive to business operations by diverting the attention and energies of management and other key personnel, and may generate adverse publicity that damages our reputation.
Such matters, even those that are ultimately non-meritorious, can be complex, costly, and highly disruptive to our business operations by diverting the attention and energies of management and other key personnel, and may generate adverse publicity that damages our reputation.
Some of the principal factors that contribute to these fluctuations are: changes in demand for our products; our effectiveness in managing manufacturing processes, costs and timing of our component purchases so that components are available when needed for production, while mitigating the risks of purchasing inventory in excess of immediate production needs; the degree to which we are able to utilize our available manufacturing capacity; changes in the cost and availability of components, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; general economic and served industry conditions; and local conditions and events that may affect our production volumes, such as labor conditions or political instability.
Some of the principal factors that contribute to these fluctuations are: changes in demand for our products; our effectiveness in managing manufacturing processes, costs and timing of our component purchases so that components are available when needed for production, while mitigating the risks of purchasing inventory in excess of immediate production needs; the degree to which we are able to utilize our available manufacturing capacity; changes in the cost and availability of components, which may occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; general economic and served industry conditions; and local conditions and events that may affect our production volumes, such as labor conditions or political instability.
Similarly, if the costs of goods continue to increase, our suppliers may seek price increases from us. If we are unable to mitigate the impact of these matters through price increases, cost savings to offset cost increases, hedging arrangements, or other measures, our CTS CORPORATION 10 Table of Contents results of operations and financial condition could be adversely impacted.
Similarly, if the cost of goods continue to increase, our suppliers may seek price increases from us. If we are unable to mitigate the impact of these matters through price increases, cost savings to offset cost increases, hedging arrangements, or other measures, our CTS CORPORATION 10 Table of Contents results of operations and financial condition could be adversely impacted.
The supply and price of our key raw materials and electronic components can be affected by a number of factors beyond our control, including market demand, inflation, alternative sources for suppliers, global geopolitical events, global or regional disease outbreaks or pandemics, trade agreements among producing and consuming nations and governmental regulations (including tariffs).
The supply and price of our key raw materials and electronic components can be affected by a number of factors beyond our control, including market demand, inflation, alternative sources for suppliers, global geopolitical events, global or regional disease outbreaks or pandemics, trade agreements among producing and consuming nations and governmental regulations.
We sell products to customers in cyclical industries that have experienced economic and industry downturns. The markets for our products have softened in the past and may again soften in the future. We may face reduced end-customer demand, underutilization of our manufacturing capacity, changes in our revenue mix and other factors that could adversely affect our results.
We sell products to customers in cyclical industries that have experienced economic and industry downturns. The markets for our products have softened in the past and may soften in the future. We may face reduced end-customer demand, underutilization of our manufacturing capacity, changes in our revenue mix and other factors that could adversely affect our results.
Our operations routinely involve receiving, storing, processing and transmitting information pertaining to our business, customers, suppliers, employees, and other operations. We have both an increasing reliance on information technology systems and an increasing digital footprint as a result of changing technologies, connected devices and digital offerings, as well as expanded remote work policies.
Our operations routinely involve receiving, storing, processing and transmitting information pertaining to our business, customers, suppliers, employees, and other operations. We have both an increasing reliance on information technology systems and an increasing digital footprint as a result of changing technologies, connected devices and digital offerings, as well as remote work policies.
As various systems and technologies become outdated or new technology is required, we may not be able to replace or introduce them as quickly as needed or in a cost-effective and timely manner. As a result, our business operations could be disrupted and we could be exposed to cybersecurity threats, adversely affecting our business operations and financial performance.
As various systems and technologies become outdated or new technology is required, we may not be able to replace or introduce them as quickly as needed or in a cost-effective manner. As a result, our business operations could be disrupted and we could be exposed to cybersecurity threats, adversely affecting our business operations and financial performance.
The industries in which we operate are highly competitive and characterized by price erosion and rapid technological change. We compete against many domestic and foreign companies, some of which have substantially greater manufacturing, financial, research and development, and marketing resources than we do.
The industries in which we operate are highly competitive and characterized by price erosion and technological change. We compete against many domestic and foreign companies, some of which have substantially greater manufacturing, financial, research and development, and marketing resources than we do.
We may not continue to repurchase our common stock or make repurchases our common stock at favorable prices. In February 2024, our Board of Directors approved a new share repurchase program that authorizes the Company to repurchase up to $100 million of its common stock.
We may not continue to repurchase our common stock or make repurchases of our common stock at favorable prices. In February 2024, our Board of Directors approved a share repurchase program that authorizes the Company to repurchase up to $100 million of its common stock.
We cannot assure you that our internal controls and procedures always will protect us from the detrimental actions by our employees or agents.
We cannot assure you that our internal controls and procedures always will protect us from detrimental actions by our employees or agents.
Such significant disruptions could be due to, among other things: • the loss or disruption of the timely availability of adequate supplies of essential raw materials for us and our suppliers, including single-source suppliers; • our ability to integrate new suppliers into our operations; • material financial issues facing our suppliers, such as bankruptcy or similar proceedings; • transportation and logistics challenges, including as a result of port and border closures and other governmental restrictions and the availability and capacity of shipping channels; • the loss or disruption of other manufacturing, distribution and supply capabilities; • the loss or disruption of the energy sources or energy suppliers in Europe due to supply shortages as a result of the Russia-Ukraine conflict, including price increases in the energy market; • labor shortages, strikes or work stoppages; • illness to our employees or their families or governmental restrictions on such employees' ability to travel or perform necessary business functions; or • as a result of the need for us or our suppliers to operate our respective businesses with substantial modifications to employee travel and employee work locations.
Such significant disruptions could be due to, among other things: • the loss or disruption of the timely availability of adequate supplies of essential raw materials for us and our suppliers, including single-source suppliers; • our ability to integrate new suppliers into our operations; • material financial issues facing our suppliers, such as bankruptcy or similar proceedings; • transportation and logistics challenges, including as a result of port and border closures and other governmental restrictions and the availability and capacity of shipping channels; • the loss or disruption of other manufacturing, distribution and supply capabilities; • the loss or disruption of the energy sources or energy suppliers in Europe due to supply shortages as a result of the Russia-Ukraine conflict, including price increases in the energy market; • labor shortages, strikes or work stoppages; • illness to our employees or their families or governmental restrictions on such employees' ability to travel or perform necessary business functions; or CTS CORPORATION 16 Table of Contents • as a result of the need for us or our suppliers to operate our respective businesses with substantial modifications to employee travel and employee work locations.
If any customer becomes dissatisfied with our prices, quality, or timeliness of delivery, among other things, it could award business to our competitors. Moreover, some of our customers could choose to manufacture and develop particular products themselves rather than purchase them from us.
If any customer becomes dissatisfied with our prices, quality, or timeliness of delivery, among other things, they could award business to our competitors. Moreover, some of our customers could choose to manufacture and develop particular products themselves rather than purchase them from us.
Our international operations are subject to inherent risks, which may materially adversely affect us, including: political and economic instability in countries in which our products are manufactured; expropriation or the imposition of government controls; changes in government regulations; export license requirements; trade restrictions; earnings repatriation and expatriation restrictions; exposure to different legal standards, including related to intellectual property; health conditions and standards; currency controls; fluctuations in exchange rates; increases in the duties and taxes we pay; inflation or deflation; greater difficulty in collecting accounts receivable and longer payment cycles; changes in labor conditions and difficulties in staffing and managing our international operations; limitations on insurance coverage against geopolitical risks, natural disasters, and business operations; and communication among and with management of international operations.
Our international operations are subject to inherent risks, which may materially adversely affect us, including: political and economic instability in countries in which our products are manufactured; expropriation or the imposition of government controls; changes in government regulations; export license requirements; trade restrictions and tariffs; earnings repatriation and expatriation restrictions; exposure to different legal standards, including related to intellectual property; health conditions and standards; currency controls; fluctuations in exchange rates; increases in the duties and taxes we pay; inflation or deflation; greater difficulty in collecting accounts receivable and longer payment cycles; changes in labor conditions and difficulties in staffing and managing our international operations; limitations on insurance coverage against geopolitical risks, natural disasters, and business operations; and communication among and with management of CTS CORPORATION 17 Table of Contents international operations.
In addition, current proposed or future governmental policies may increase the risk of inflation, which could further increase the costs of raw materials and other components for our business.
In addition, current proposed or future governmental policies (including tariffs) may increase the risk of inflation, which could further increase the costs of raw materials and other components for our business.
Failure to comply with existing laws and regulations or changes in these laws, regulations, or interpretations thereof, specifically tax and environmental laws or any other laws or regulations could result in the loss, revocation or suspension of our licenses, permits or approvals and could have a material adverse effect on our business, financial condition and results of operations.
Failure to comply with existing laws and regulations or changes in these laws, regulations, or interpretations thereof, specifically tax laws could result in the loss, revocation or suspension of our licenses, permits or approvals and could have a material adverse effect on our business, financial condition and results of operations.
If we are found to be liable for violations of Anti-Bribery Laws (either due to our own acts or inadvertence or due to the acts or inadvertence of others), we could suffer from criminal or civil penalties or other sanctions, which could have a material adverse effect on our business.
If we are found to be liable for violations of Anti-Bribery Laws (either due to our own acts or inadvertence or due to the acts or inadvertence of others), we could be subjected to criminal or civil penalties or other sanctions, which could have a material adverse effect on our business.
The impacts of any such circumstances could include production downtimes, operational delays, and other impacts on our operations and ability to provide products and services to our customers; compromise of confidential, proprietary or otherwise protected information, including personal information and customer confidential data; destruction, corruption, or theft of data or intellectual property; manipulation, disruption, or improper use of these technologies, systems, products or services; financial losses from fraudulent transactions, remedial actions, loss of business or potential liability; adverse media coverage; and legal claims or legal proceedings, including regulatory investigations, actions and fines; and damage to our reputation and, as a result, have a material adverse effect on our business operations and financial performance.
The impacts of any such circumstances could include production downtimes, operational delays, and other impacts on our operations and ability to provide products and services to our customers; compromise of confidential, proprietary or otherwise protected information, including personal information and customer confidential data; destruction, corruption, or theft of data or intellectual property; manipulation, disruption, or improper use of these technologies, systems, products or services; financial losses from fraudulent transactions, remedial actions, loss of business or potential liability; adverse media coverage or publicity; legal claims or legal proceedings, including class action and commercial litigation, ransom payments, regulatory investigations, actions and fines; and damage to our reputation and, as a result, have a material adverse effect on our business operations and financial performance.
Our business could be interrupted and our financial results could be materially adversely impacted by physical risks such as earthquakes, fires, hurricanes, floods, acts of war, terrorist attacks, cyberattacks and other disruptions in information systems, disease outbreaks or CTS CORPORATION 15 Table of Contents pandemics, and other natural disasters or catastrophic events that damage, disrupt or destroy one of our key facilities or the key facilities of our significant suppliers.
Our business could be interrupted and our financial results could be materially adversely impacted by physical risks such as earthquakes, fires, hurricanes, floods, acts of war, terrorist attacks, cyberattacks and other disruptions in information systems, disease outbreaks or pandemics, and other natural disasters or catastrophic events that damage, disrupt or destroy one of our key facilities or the key facilities of our significant suppliers.
Our 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; repurchase stock; or make dividend payments above a certain amount.
CTS CORPORATION 15 Table of Contents Our 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; repurchase stock; or make dividend payments above a certain amount.
From time to time, we and the service providers that we depend on to host our data and support our systems and business operations, are the target of, and periodically respond to, cybersecurity threats, including phishing and denial-of-service attacks, which, if successful, could result in a loss of business or customer information, systems interruption or the disruption of our operations.
From time to time, we and the service providers or other business partners that we depend on to host our data and support or provide our systems and business operations, are the target of, and periodically respond to, cybersecurity threats, including phishing and denial-of-service attacks, which, if successful, could result in a loss of business or customer information, systems interruption or the disruption of our operations, among other things.
If we were to experience turnover of senior management or if a member of our senior management were to become ill or incapacitated, our stock price, our results of operations, our commercial and supply chain operations and our vendor or customer relationships could each be adversely impacted, and such events may make recruiting for future management positions more difficult.
If we were to experience turnover of senior management or if a member of our senior management were to become ill or incapacitated, our stock price, our results of operations, CTS CORPORATION 18 Table of Contents our commercial and supply chain operations and our vendor or customer relationships could each be adversely impacted, and such events may make recruiting for future management positions more difficult.
In addition, because many of our costs and operating expenses are relatively fixed over the short-term, a reduction in customer demand could harm our gross margin and operating income until such time as adjustments can be made to activity and operating levels or to structural costs.
In addition, CTS CORPORATION 9 Table of Contents because many of our costs and operating expenses are relatively fixed over the short term, a reduction in customer demand could harm our gross margin and operating income until such time as adjustments can be made to activity and operating levels or to structural costs.
CTS CORPORATION 16 Table of Contents We are from time to time involved in or subject to a variety of litigation, claims, legal or regulatory proceedings or matters related to our business, warranty claims, our intellectual property rights, alleged infringement or misappropriation by us of intellectual property rights of others, tax, environmental, privacy, insurance, ERISA and employment matters.
We are from time to time involved in or subject to a variety of litigation, claims, legal or regulatory proceedings or matters related to our business, warranty claims, our intellectual property rights, alleged infringement or misappropriation by us of intellectual property rights of others, tax, environmental, privacy, insurance, ERISA and employment matters.
A reduction in, or the completion of, our repurchase program could have a negative effect on our stock price. We can provide no assurance that we will repurchase our common stock at favorable prices, or at all. On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was enacted.
A reduction in, or the completion of, our repurchase program could have a negative effect on our stock price. We can provide no assurance that we will repurchase our common stock at favorable prices, or at all. CTS CORPORATION 19 Table of Contents On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was enacted.
These and other factors could harm our ability to achieve anticipated levels of profitability from acquired operations or realize other anticipated benefits of an acquisition and could adversely affect our business and operating results. CTS CORPORATION 11 Table of Contents We have in the past, and may in the future, consider divesting certain business operations.
These and other factors could harm our ability to achieve anticipated levels of profitability from acquired operations or realize other anticipated benefits of an acquisition and could adversely affect our business and operating results. We have in the past, and may in the future, consider divesting certain business operations.
We collect internal and customer data and other information, including personally identifiable information for a variety of business purposes, including managing our workforce and providing requested products and services.
We collect internal and customer data and other information, including personal data for a variety of business purposes, including managing our workforce and providing requested products and services.
We could be exposed to investigations, fines, penalties, restrictions, litigation, reputational harm or other expenses, or other adverse effects on our business, due to failure to protect personal data or other sensitive information or failure to maintain compliance with the various U.S. and foreign data collection and privacy laws or applicable data security standards.
We could be exposed to investigations and regulatory actions, fines, penalties, restrictions, individual, class action, and commercial litigation, reputational harm or other expenses, or other adverse effects on our business, due to failure to protect personal data or other sensitive information or failure to maintain compliance with the various U.S. and foreign data collection and privacy laws or applicable data security standards.
We often increase staffing and capacity and incur other expenses to meet the anticipated demand of our customers, which causes reductions in our gross margins if customer orders are delayed or canceled. On occasion, customers may require rapid increases in production, which may stress our CTS CORPORATION 9 Table of Contents resources and reduce margins.
We often increase staffing and capacity and incur other expenses to meet the anticipated demand of our customers, which causes reductions in our gross margin if customer orders are delayed or canceled. On occasion, customers may require rapid increases in production, which may stress our resources and reduce margins.
Perceived uncertainties as to our future direction as a result of shareholder activism may lead to the perception of a change CTS CORPORATION 18 Table of Contents in the direction of the business or other instability and may affect our relationships with vendors, customers, prospective and current employees and others.
Perceived uncertainties as to our future direction as a result of shareholder activism may lead to the perception of a change in the direction of the business or other instability and may affect our relationships with vendors, customers, prospective and current employees and others.
Many jurisdictions, including the E.U., the U.K., China and certain states within the U.S., have passed laws that require companies to meet specific requirements regarding the processing, use, and disclosure of personal data.
Many jurisdictions, including the E.U., the U.K., China and certain states within the U.S., have passed laws that require companies to meet specific requirements regarding the processing, use, and disclosure of personal data and giving individuals certain rights over their personal data.
Because third parties provide us with a number of operational and technical services, third-party cybersecurity incidents could expose us to liability, harm our reputation, damage our competitiveness and adversely affect our financial performance. CTS CORPORATION 14 Table of Contents Third parties provide us with certain operational and technical services.
Because third parties provide us with a number of operational and technical services, third-party cybersecurity incidents could expose us to liability, harm our reputation, damage our competitiveness and adversely affect our financial performance. Third parties provide us with certain operational and technical services.
Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our products or services and liability claims against us. Despite our quality control and quality assurance efforts, defects may occur in the products we manufacture due to design or manufacturing errors, supplier quality issues, or component failure.
Products we manufacture may contain design or manufacturing defects that could result in reduced demand for our products or services and liability claims against us. We maintain high quality control and quality assurance processes. However, defects may occur in the products we manufacture due to design or manufacturing errors, supplier quality issues, or component failure.
Our inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our technology, cause us to lose sales or otherwise harm our business. CTS CORPORATION 17 Table of Contents We believe that patents will continue to play an important role in our business.
Our inability to protect our intellectual property rights could diminish or eliminate the competitive advantages that we derive from our technology, cause us to lose sales or otherwise harm our business. We believe that patents will continue to play an important role in our business.
As we grow our business, the risk of exposure to product liability litigation increases. We may be required to participate in a recall involving products which are, or are alleged to be, defective.
CTS CORPORATION 12 Table of Contents As we grow our business, the risk of exposure to product liability litigation increases. We may be required to participate in a recall involving products which are, or are alleged to be, defective.
If our competitors maintain or substantially lower their prices, we may lose customers and mark down prices. Our profitability may be impacted by prices that do not offset the inflationary pressures, which may impact our gross margins. Even if we are able to raise the prices of our products, we may not be able to sustain such price increases.
If our competitors maintain or substantially lower their prices, we may lose customers or have to reduce prices. Our profitability may be impacted by prices that do not offset the inflationary pressures, which may impact our gross margin. Even if we are able to raise the prices of our products, we may not be able to sustain such price increases.
Compliance with EHS laws and regulations is a major consideration for us because we use CTS CORPORATION 12 Table of Contents hazardous materials in our manufacturing processes. If we violate EHS laws and regulations, we could be liable for substantial fines, penalties, and costs of mandated remedial actions and we could suffer reputational damage due to any such violations.
Compliance with EHS laws and regulations is a major consideration for us because we use hazardous materials in our manufacturing processes. If we are found to be in violation of EHS laws and regulations, we could be liable for substantial fines, penalties, and costs of mandated remedial actions and we could suffer reputational damage due to any such violations.
In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage newly acquired businesses such as TEWA, Ferroperm and Maglab, including their operations or employees.
In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage newly acquired businesses such as CTS CORPORATION 11 Table of Contents TEWA, Ferroperm, Maglab, and SyQwest including their operations or employees.
Risks Related to Technology and Data Privacy CTS CORPORATION 13 Table of Contents We are exposed to, and may be adversely affected by, cybersecurity threats, incidents or other disruptions to our information technology systems and data.
Risks Related to Technology and Data Privacy We are exposed to, and may be adversely affected by, cybersecurity threats, incidents or other disruptions to our information technology systems and data.
The introduction of products embodying new technologies and the emergence of new industry standards could render our existing products obsolete and unmarketable before we can recover any or all of our research, development and commercialization expenses, or our capital investments.
The introduction of products embodying new technologies and the emergence of new industry standards could render our existing products obsolete and unmarketable before we can recover any or all of our research, development and commercialization expenses, or our capital investments. Furthermore, the life cycles of our products may change and are difficult to estimate.
We may have difficulty finding suitable acquisition opportunities or, if we do identify these opportunities, we may not be able to complete the transactions for any number of reasons including a failure to secure financing.
(“TEWA”), Meggitt A/S (a/k/a Ferroperm Piezoceramics A/S, “Ferroperm”), maglab AG ("Maglab"), and SyQwest, LLC ("SyQwest"). We may have difficulty finding suitable acquisition opportunities or, if we do identify these opportunities, we may not be able to complete the transactions for any number of reasons including a failure to secure financing.
In addition, changes to existing tax laws or the adoption of new tax laws, particularly in the U.S. and the E.U., could have a material adverse impact on our effective tax rate, future cash tax liabilities and the ability to utilize deferred tax assets.
Changes in tax laws could cause volatility or have a material adverse effect on our business and financial results. Changes to existing tax laws or the adoption of new tax laws could have a material adverse impact on our effective tax rate, future tax liabilities and the ability to utilize deferred tax assets.
Failure to keep pace with developments in technology could adversely affect our operations or competitive position. The technologies and systems we use to operate our business may require refinements and upgrades, and third parties may cease support of systems that are currently in use. The development and maintenance of these technologies may require significant investment by us.
The technologies and systems we use to operate our business may require refinements and upgrades, and third parties may cease support of systems that are currently in use. The development and maintenance of these technologies may require significant investment by us.
Before you invest in us, you should know that making such an investment involves risks, including the risks described below. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.
Before you invest in us, you should know that making such an investment involves risks, including the risks described below. Although the risks are organized by headings, and each risk is discussed separately, many are interrelated. The risks that are highlighted below are not the only ones that we face.
The risks that are highlighted below are not the only ones that we face. If any of the following risks occur, our business, financial condition and operating results could be negatively affected.
If any of the following risks occur, our business, financial condition and operating results could be negatively affected.
We have in the past been subject to cybersecurity incidents which have not had a material impact on our business or financial condition and expect that we will be subject to additional cybersecurity incidents in the future. We are exposed to risks and costs associated with complying with privacy laws and protecting personal data and other sensitive information.
We have in the past been subject to cybersecurity incidents which have not had a material impact on our business or financial condition and expect that we will be subject to additional cybersecurity incidents in the future.
On an ongoing basis we explore opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or product lines or that might otherwise offer us growth opportunities. For example, during 2022 and 2023, we acquired TEWA Temperature Sensors SP. Zo.o. (“TEWA”), Meggitt A/S (a/k/a Ferroperm Piezoceramics A/S, “Ferroperm”) and maglab AG ("Maglab").
On an ongoing basis we explore opportunities to buy other businesses or technologies that could complement, enhance or expand our current business or product lines or that might otherwise offer us growth opportunities. For example, over the last few years, we have acquired TEWA Temperature Sensors SP. Zo.o.
Any cybersecurity incidents involving third parties on which we rely could negatively affect our reputation, our competitive position and our financial performance, and we could face regulatory scrutiny, investigations, lawsuits and further potential liability . Risks Related to Indebtedness and Financing Our indebtedness may adversely affect our financial health.
Any cybersecurity incidents involving third parties on which we rely could negatively affect our reputation, our competitive position and our financial performance, and we could face regulatory scrutiny, investigations, lawsuits and further potential liability . As we integrate artificial intelligence technologies into our processes, these technologies may present business, compliance and reputational risks.
We are susceptible to trends and factors affecting industries that we serve. Factors negatively affecting the industries we serve and the demand for their products could negatively affect our business, financial condition and operating results.
For example, delays in sales of products for defense applications and/or push-outs may adversely impact our results of operations, including quarterly earnings. We are susceptible to trends and factors affecting industries that we serve. Factors negatively affecting the industries we serve and the demand for their products could negatively affect our business, financial condition and operating results.
These third parties may have access to our systems, provide hosting services, or otherwise process data about or on behalf of us, our employees or partners. Any third-party cybersecurity incident could compromise the security, integrity or availability of or result in the theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations.
Any cybersecurity incident impacting a third party business partner or service provider could compromise the security, integrity or availability of systems or data, or result in the theft, unauthorized access or processing, or disruption of access to data, which could negatively impact our operations.
Additionally, modifications of laws and policies governing foreign trade and investment, including trade agreements and tariffs such as the United States-Mexico-Canada Agreement, or the European Union-United Kingdom Trade and Cooperating Agreement, could adversely affect our supply chain, business and results of operations.
Protectionist trade legislation in the United States, the E.U., the U.K., Canada, China or Mexico, such as a change in current tariff structures, export or import compliance laws, or other trade policies could adversely affect our supply chain, business and results of operations.
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Furthermore, the life cycles of our products and the products we manufacture for others vary, may change, and are difficult to estimate.
Added
A portion of our revenue is derived from the sale of defense-related products through various contracts and subcontracts. These contracts may be suspended, canceled, or delayed, which could have an adverse impact on our revenues. We sell products to customers in the aerospace and defense end market. A portion of these customers operate under contracts with the U.S.
Removed
Changes in tax, environmental, trade or other regulations or failure to comply with existing licensing, trade and other regulations could cause volatility or have a material adverse effect on our business and financial results.
Added
Government, which are vulnerable to termination at any time, for convenience or default. Some of the reasons for cancellation include, but are not limited to, budgetary constraints or re-appropriation of government funds, timing of contract awards, violations of legal or regulatory requirements, and changes in political agenda.
Removed
Future changes to U.S. or foreign tax and trade policies, impositions of new or increased tariffs, other trade restrictions or other government actions, including any government shutdown, may lead to the continuation or escalation of such risks and uncertainty.
Added
If cancellations were to occur, it would result in a reduction in our revenue. Furthermore, significant reductions to defense spending could occur over the next several years due to government spending cuts, which could have a significant adverse impact on us.
Removed
The implementation of additional tariffs and retaliatory tariffs from trade partners or related uncertainties could further increase the cost of certain of our imported materials, thereby adversely affecting our profitability.
Added
CTS CORPORATION 13 Table of Contents Uncertainty over global tariffs and trade policies, or the financial impact of tariffs and trade policies, may negatively affect our results.
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Similarly, further changes to United States and foreign trade and tax policies, including heightened import restrictions, import and export licenses, new tariffs, trade embargoes, government sanctions, and trade barriers could have a similar impact. Increased tariffs could require us to increase our prices, which could decrease demand for our products.
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In addition, other countries may limit their trade with the United States or retaliate through their own restrictions and/or increased tariffs, which could affect our ability to export products and therefore adversely affect our sales.
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Many of these challenges, particularly tariffs, are present, or may arise in commerce with the E.U., China, and Mexico markets in which we operate and with which we do business. While we believe we have taken steps to mitigate their potential effects, our mitigation activities may prove to be ineffective or detrimental to our business.
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There exists substantial uncertainty as to whether such tariffs will be fully implemented or sustained. There can be no assurances that such tariffs will not be implemented or increased in the future, with the previously mentioned countries or additional countries with which we do business.
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The degree to which these changes in U.S. tariff structures or other trade policy affect our business and results of operations will be influenced by the specific details of the changes in tariffs or other trade policies, their timing and duration, and our effectiveness in deploying tools and strategies to address these issues.
Added
CTS CORPORATION 14 Table of Contents We are exposed to risks and costs associated with complying with privacy laws and protecting personal data and other sensitive information.
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Failure to keep pace with developments in technology could adversely affect our operations or competitive position and we may be exposed to risks and incur costs associated with maintaining or upgrading our technology and systems.
Added
These third parties may have access to our systems, provide hosting services or other services to support our business, or otherwise process data about or on behalf of us, our employees or partners.
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Recent technological advances in artificial intelligence (“AI”) and machine-learning technology present new opportunities and also pose new risks. Our introduction of these technologies into our internal processes may result in new or expanded risks and liabilities.
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Such risks and liabilities include enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. The utilization of AI could also result in loss of intellectual property and subject us to heightened risks related to intellectual property infringement or misappropriation.
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The use of AI can lead to unintended consequences, including generating content that is inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and expose us to risks related to inaccuracies or errors in the output of such technologies.
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Risks Related to Indebtedness and Financing Our indebtedness may adversely affect our financial health.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeGovernance Our cybersecurity program is overseen by a Vice President of IT & Digitization and information technology team (collectively, the “IT Team”) responsible for identifying, assessing, monitoring, managing and communicating the Company’s cybersecurity risks. The IT team includes members with experience developing and implementing enterprise-wide cybersecurity strategies and initiatives, managing risks relating thereto, and evaluating industry standards and regulations.
Biggest changeOur Vice President of IT & Digitization is supported by a team of enterprise information system and security risk professionals (collectively, the “IT Team”), who are responsible for identifying, assessing, monitoring, managing and communicating the Company’s cybersecurity risks.
Item 1C. Cybersecurity Risk Management and Strategy The Company’s cybersecurity risk management strategy is comprised of several key elements. We assess our information technology and data management/storage systems and related policies and practices and to help guide and prioritize our cybersecurity and information technology-related investments, activities and risk management strategy.
Item 1C. Cybersecurity Risk Management and Strategy The Company’s cybersecurity risk management strategy is comprised of several key elements. We assess our information technology and data management/storage systems and related policies and practices to help guide and prioritize our cybersecurity and information technology-related investments, activities and risk management strategy.
The training is administered to employees on a rolling basis, and we use a third-party provider for the content periodically update the training to incorporate new cybersecurity-related developments. The oversight of our cybersecurity risk is integrated into our enterprise-wide risk management process.
The training is administered to employees on a rolling basis, and we use a third-party provider for the content and periodically update the training to incorporate new cybersecurity-related developments. The oversight of our cybersecurity risk is integrated into our enterprise-wide risk management process.
The IT Team is responsible for implementing and monitoring the effectiveness of any remediation plan adopted as a result of the cybersecurity incident.
The IT Team is responsible for implementing and monitoring the effectiveness of any remediation plan adopted as a result of a cybersecurity incident.
As of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
As of the date of this Annual Report on Form 10-K, we are not aware of any cybersecurity threats, including as a result of previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company , including its business strategy, results of operations or financial condition.
In addition, the Board is provided with an annual cybersecurity update that addresses similar topics to those discussed with the Audit Committee on a quarterly basis. In the event of a reported potential cybersecurity incident, our IT Team decides whether such incident triggers our Cybersecurity Threat Evaluation and Response Plan (the “Response Plan”).
In addition, the Board CTS CORPORATION 20 Table of Contents is provided with an annual cybersecurity update that addresses similar topics to those discussed with the Audit Committee on a quarterly basis. In the event of a reported potential cybersecurity incident, our IT Team decides whether such an incident triggers our Cybersecurity Threat Evaluation and Response Plan (the “Response Plan”).
However, there can be no assurance that our efforts to prevent or mitigate CTS CORPORATION 19 Table of Contents cybersecurity incidents will be successful. Please see “Risks Related to Technology and Data Privacy” in “Risk Factors” in Section 1A of this Annual Report on Form 10-K.
However, there can be no assurance that our efforts to prevent or mitigate cybersecurity incidents will be successful. Please see “Risks Related to Technology and Data Privacy” in “Risk Factors” in Section 1A of this Annual Report on Form 10-K.
While our Board has the ultimate oversight responsibility for the risk management process, the Audit Committee is responsible for oversight of our cybersecurity strategy and risks. The Audit Committee is provided with quarterly and as needed updates on the Company’s cybersecurity strategy and risks.
While our Board has the ultimate oversight responsibility for the risk management process, the Audit Committee is responsible for oversight of our cybersecurity strategy and risks. The Vice President of IT & Digitization and other members of management provide t he Audit Committee with quarterly and as needed updates on the Company’s cybersecurity strategy and risks.
From time to time we use third-party service providers and software to augment and test our technology solutions and further support our risk mitigation strategy.
From time to time, we use third-party service providers and software to augment and test our technology solutions and further support our risk mitigation strategy. Further, the Company maintains processes to oversee and identify material risks from cybersecurity threats associated with its use of third-party service providers.
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CTS uses a managed security services provider (MSSP) and other technologies to collect alerts and security audit logs, monitor and assess cybersecurity threat intelligence, and take actions to help us prevent, detect, mitigate and remediate cybersecurity incidents.
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We have in the past been subject to cybersecurity incidents which have not had a material impact on our business or financial condition and expect that we will be subject to additional cybersecurity incidents in the future.
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Governance Our cybersecurity program is overseen by our Vice President of IT & Digitization, who has over 14 years of experience working in various information technology roles and has managed and evolved the cybersecurity function at CTS for the past three years.
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The IT Team includes a cybersecurity leader with over 30 years of experience in IT infrastructure, IT operations and cybersecurity, and members who hold Certified Information Systems Security Professional (CISSP) and Certified Information System Auditor (CISA) certifications and have experience developing and implementing enterprise-wide cybersecurity strategies and initiatives, managing risks relating thereto, and evaluating industry standards and regulations.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeNon-Manufacturing Facilities Owned/Leased Description Boise, Idaho Leased Warehouse Brownsville, Texas Owned Land Brownsville, Texas Leased Warehouse El Paso, Texas Leased (1) Office and Warehouse Elkhart, Indiana Owned Idle facility Elkhart, Indiana Owned Administrative and research offices Farmington Hills, Michigan Leased Sales office Hopkinton, Massachusetts Owned Idle facility Juarez, Mexico Leased (1) Idle facility Kaohsiung, Taiwan Leased Administrative and research offices Lisle, Illinois Leased Administrative and research offices Matamoros, Mexico Leased Warehouse and administrative offices Nagoya, Japan Leased Sales office Nogales, Mexico Leased Warehouse and administrative offices Singapore Leased Sales office Tecate, Mexico Leased Warehouse and administrative offices Tecate, Mexico Owned Idle facility Yokohama, Japan Leased Sales office Zug, Switzerland Leased Administrative, sales and research offices (1) These facilities relate to the ongoing restructuring activities involving the Juarez and Matamoros site consolidation..
Biggest changeNon-Manufacturing Facilities Owned/Leased Description Boise, Idaho Leased Warehouse Brownsville, Texas Owned Land Brownsville, Texas Leased Warehouse Elkhart, Indiana Owned Idle facility Elkhart, Indiana Owned Administrative and research offices Farmington Hills, Michigan Leased Sales office Juarez, Mexico Leased (1) Idle facility Kaohsiung, Taiwan Leased Administrative and research offices Lisle, Illinois Leased Administrative and research offices Matamoros, Mexico Leased Administrative offices Nagoya, Japan Leased Sales office Nogales, Mexico Leased Warehouse and administrative offices Rüsselsheim, Germany Leased Administrative and sales office Singapore Leased Sales office Tecate, Mexico Leased Warehouse and administrative offices Tecate, Mexico Owned Idle facility Yokohama, Japan Leased Sales office Zug, Switzerland Leased Administrative, sales and research offices (1) This facility relates to the ongoing restructuring activities involving the Juarez and Matamoros site consolidation.
P roperties As of December 31, 2023, we had manufacturing facilities, administrative, research and development and sales offices in the following locations: Manufacturing Facilities Owned/Leased Albuquerque, New Mexico Leased Boise, Idaho Leased Calamba, Philippines Leased Kaohsiung, Taiwan Leased (1) Kvistgaard, Denmark Leased Leczna, Poland Leased Lisle, Illinois Leased Lublin, Poland Leased Matamoros, Mexico Owned Matamoros, Mexico Leased Tecate, Mexico Leased Nogales, Mexico Leased Nupaky, Czech Republic Leased Ostrava, Czech Republic Leased Tianjin, China Owned (2) Zhongshan, China Leased (1) Ground lease through 2026; restrictions on use and transfer apply.
P roperties As of December 31, 2024, we had manufacturing facilities, administrative, research and development and sales offices in the following locations: Manufacturing Facilities Owned/Leased Albuquerque, New Mexico Leased Boise, Idaho Leased Calamba, Philippines Leased Cranston, Rhode Island Leased Kaohsiung, Taiwan Leased (1) Kvistgaard, Denmark Leased Leczna, Poland Leased Lisle, Illinois Leased Lublin, Poland Leased Matamoros, Mexico Owned Matamoros, Mexico Leased Tecate, Mexico Leased Nogales, Mexico Leased Nupaky, Czech Republic Leased Ostrava, Czech Republic Leased Tianjin, China Owned (2) Zhongshan, China Leased (1) Ground lease through 2026; restrictions on use and transfer apply.
The extent of utilization varies from plant to plant and with economic conditions. We also review the operating costs of our facilities and may from time-to-time relocate a portion of our manufacturing activities in order to reduce operating costs and improve asset utilization and cash flow.
We also review the operating costs of our facilities and CTS CORPORATION 21 Table of Contents may from time-to-time relocate a portion of our manufacturing activities in order to reduce operating costs and improve asset utilization and cash flow.
(2) Land Use Rights Agreement through 2050 includes transfer, lease and mortgage rights. CTS CORPORATION 20 Table of Contents A small portion of the China, Czech Republic, and Denmark locations above also maintain sales offices.
(2) Land Use Rights Agreement through 2050 includes transfer, lease and mortgage rights. Selected China, Czech Republic, and Denmark locations above also maintain sales offices.
We regularly assess our facilities for manufacturing capacity, available labor, and proximity to our markets and major customers. Management believes our manufacturing facilities are suitable and adequate and have sufficient capacity to meet our current needs including approximately 1 million square feet of manufacturing and 750 thousand square feet of non-manufacturing spaces.
We regularly assess our facilities for manufacturing capacity, available labor, and proximity to our markets and major customers. Management believes our manufacturing facilities are suitable and adequate and have sufficient capacity to meet our current needs. The extent of utilization varies from plant to plant and with economic conditions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeShareholder Performance Graph The following graph shows a five-year comparison of the cumulative total shareholder return on CTS common stock with the cumulative total returns of a general market index and a peer group index (Russell 2000 Index and Dow Jones Electrical Components & Equipment Industry Group).
Biggest change(a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Programs (d) Maximum Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs October 1, 2024 – October 31, 2024 89,500 $ 48.70 89,500 $ 64,951,459 November 1, 2024 – November 30, 2024 32,500 $ 54.81 32,500 $ 63,170,287 December 1, 2024 – December 31, 2024 31,500 $ 54.49 31,500 $ 61,422,237 Total 153,500 153,500 Shareholder Performance Graph The following graph shows a five-year comparison of the cumulative total shareholder return on CTS common stock with the cumulative total returns of a general market index and a peer group index (Russell 2000 Index and Dow Jones Electrical Components & Equipment Industry Group).
The graph tracks the performance of a $100 investment in the Company's common stock and in each of the indexes (with the reinvestment of all dividends) on December 31, 2018. Historical stock price performance should not be relied upon as an indication of future stock price performance.
The graph tracks the performance of a $100 investment in the Company's common stock and in each of the indexes (with the reinvestment of all dividends) on December 31, 2019. Historical stock price performance should not be relied upon as an indication of future stock price performance.
The performance graph in this Annual Form 10-K shall be deemed furnished, and not filed, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act as a result of this furnishing, except to the extent that we specifically incorporate it by reference.
The performance graph in this Annual Report on Form 10-K shall be deemed furnished, CTS CORPORATION 22 Table of Contents and not filed, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act as a result of this furnishing, except to the extent that we specifically incorporate it by reference.
Item 5. Market for Registrant's Common Equity, Related Sha reholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange under the symbol "CTS." On February 16, 2024, there were approximately 771 shareholders of record.
Item 5. Market for Registrant's Common Equity, Related Sha reholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange under the symbol "CTS." On February 21, 2025, there were approximately 727 shareholders of record.
On February 9, 2023, the Board approved a share repurchase program that authorized the Company to repurchase up to $50 million of its common stock. The repurchase program had no set expiration date and superseded and replaced the repurchase program approved by the Board in May 2021.
On February 2, 2024, the Board approved a new share repurchase program that authorized the Company to repurchase up to $100 million of its common stock. The new share repurchase program has no set expiration date and superseded and replaced the repurchase program approved by the Board in February 2023.
Removed
CTS CORPORATION 21 Table of Contents (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Programs (d) Maximum Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs October 1, 2023 – October 31, 2023 97,982 $ 40.38 97,982 $ 24,445,949 November 1, 2023 – November 30, 2023 171,665 $ 39.53 171,665 $ 17,660,741 December 1, 2023 – December 31, 2023 115,817 $ 41.03 115,817 $ 12,908,355 Total 385,464 385,464 On February 2, 2024, the Board approved a new share repurchase program that authorizes the Company to repurchase up to $100 million of its common stock.
Removed
The new share repurchase program has no set expiration date and supersedes and replaces the repurchase program approved by the Board in February 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations: Year Ended December 31, 2023 versus Year Ended December 31, 2022 (Amounts in thousands, except percentages and per share amounts): The following table highlights changes in significant components of the Consolidated Statements of Earnings for the years ended December 31, 2023, and December 31, 2022: Years Ended December 31, Percent of Net Sales 2023 2022 Percent Change 2023 2022 Net sales $ 550,422 $ 586,869 (6.2 )% 100 % 100 % Cost of goods sold 359,563 376,331 (4.5 ) 65.3 64.1 Gross margin 190,859 210,538 (9.3 ) 34.7 35.9 Selling, general and administrative expenses 83,816 91,520 (8.4 ) 15.2 15.6 Research and development expenses 24,918 24,100 3.4 4.5 4.1 Restructuring charges 7,074 1,912 270.0 1.3 0.3 Total operating expenses 115,808 117,532 (1.5 ) 21.0 20.0 Operating earnings 75,051 93,006 (19.3 ) 13.6 15.8 Total other income (expense), net 102 (12,269 ) (100.8 ) 0.0 (2.1 ) Earnings before taxes 75,153 80,737 (6.9 ) 13.7 13.8 Income tax expense 14,621 21,162 (30.9 ) 2.7 3.6 Net earnings $ 60,532 $ 59,575 1.6 % 11.0 % 10.2 % Diluted earnings per share: Diluted net earnings per share $ 1.92 $ 1.85 Net sales were $550,422 for the year ended December 31, 2023, a decrease of $36,447, or 6.2% from 2022.
Biggest changeResults of Operations: Year Ended December 31, 2024 versus Year Ended December 31, 2023 (Amounts in thousands, except percentages and per share amounts): The following table highlights changes in significant components of the Consolidated Statements of Earnings for the years ended December 31, 2024, and December 31, 2023: Years Ended December 31, Percent of Net Sales 2024 2023 Percent Change 2024 2023 Net sales $ 515,771 $ 550,422 (6.3 )% 100 % 100 % Cost of goods sold 326,621 359,563 (9.2 ) 63.3 65.3 Gross margin 189,150 190,859 (0.9 ) 36.7 34.7 Selling, general and administrative expenses 88,285 83,816 5.3 17.1 15.2 Research and development expenses 23,388 24,918 (6.1 ) 4.5 4.5 Restructuring charges 4,697 7,074 (33.6 ) 0.9 1.3 Total operating expenses 116,370 115,808 0.5 22.6 21.0 Operating earnings 72,780 75,051 (3.0 ) 14.1 13.6 Total other (expense) income, net (1,557 ) 102 (1,626.5 ) (0.3 ) 0.0 Earnings before taxes 71,223 75,153 (5.2 ) 13.8 13.7 Income tax expense 13,109 14,621 (10.3 ) 2.5 2.7 Net earnings $ 58,114 $ 60,532 (4.0 )% 11.3 % 11.0 % Diluted earnings per share: Diluted net earnings per share $ 1.89 $ 1.92 Net sales were $515,771 for the year ended December 31, 2024, a decrease of $34,651, or 6.3%, from 2023.
See Note 13, “Debt” and Note 14, “Derivatives,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further details of our debt and hedging activities. • Operating lease payments – We enter into various noncancelable lease agreements for land, buildings and equipment used in our operations.
See Note 13, “Debt,” and Note 14, “Derivatives,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further details of our debt and hedging activities. • Operating lease payments – We enter into various noncancelable lease agreements for land, buildings and equipment used in our operations.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The expense and corresponding accrual primarily relate to our products sold to our transportation markets. These estimates are established using a quoted industry rate and are based on customer specific circumstances. We adjust our warranty reserve for any known or anticipated warranty claims as new information becomes available.
The expense and corresponding accrual primarily relate to our products sold to our transportation market. These estimates are established using a quoted industry rate and are based on customer specific circumstances. We adjust our warranty reserve for any known or anticipated warranty claims as new information becomes available.
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 December 31, 2023.
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 December 31, 2024.
In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.
In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.
Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit rating, our financial performance, and global credit market conditions, as well as a broad range of other factors.
Our liquidity, access to capital, and borrowing costs could be adversely impacted by declines in our credit quality, our financial performance, and global credit market conditions, as well as a broad range of other factors.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
We manufacture sensors, actuators and connectivity components in North America, Europe, and Asia. CTS provides engineered products to OEMs and tier one suppliers in the aerospace and defense, industrial, medical, and transportation markets. There is an increasing proliferation of sensing and motion applications within various markets we serve.
We manufacture sensors, actuators and connectivity components in North America, Europe, and Asia. CTS provides engineered products to OEMs and tier one suppliers in the aerospace and defense, industrial, medical, and transportation markets, and the U.S. Government. There is an increasing proliferation of sensing and motion applications within various markets we serve.
We evaluate our warranty obligations at least quarterly and adjust our accruals if it is probable that future costs will be different than our current reserve. Over the last three years, product warranty reserves have ranged from 0.4% to 2.7% of net sales.
We evaluate our warranty obligations at least quarterly and adjust our accruals if it is probable that future costs will be different than our current reserve. Over the last three years, product warranty reserves have ranged from 0.3% to 0.4% of net sales.
Factors considered that may trigger an impairment review consist of, but are not limited to, the following: • Significant decline in market capitalization relative to net book value, • Significant underperformance relative to expected historical or projected future operating results, • Significant changes in the manner of use of the acquired assets or the strategy for the overall business, and CTS CORPORATION 27 Table of Contents • Significant negative industry or economic trends.
Factors considered that may trigger an impairment review consist of, but are not limited to, the following: • Significant decline in market capitalization relative to net book value, • Significant underperformance relative to expected historical or projected future operating results, • Significant changes in the manner of use of the acquired assets or the strategy for the overall business, and • Significant negative industry or economic trends.
Capital Resources Long-term debt was comprised of the following: As of December 31, 2023 2022 Total credit facility availability $ 400,000 $ 400,000 Balance outstanding 67,500 83,670 Standby letters of credit 1,640 1,640 Amount available, subject to covenant restrictions $ 330,860 $ 314,690 Weighted-average interest rate 6.07 % 2.96 % 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 sublimits 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.
Capital Resources Long-term debt was comprised of the following: As of December 31, 2024 2023 Total credit facility availability $ 400,000 $ 400,000 Balance outstanding 91,253 67,500 Standby letters of credit 1,640 1,640 Amount available, subject to covenant restrictions $ 307,107 $ 330,860 Weighted-average interest rate 6.41 % 6.07 % 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 sublimits 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.
For 2023, we elected to perform the qualitative assessment. Based upon our latest assessment, we determined that our goodwill was not impaired as of October 1, 2023. We will monitor future results and will perform a test if indicators trigger an impairment review.
For 2024, we elected to perform the quantitative assessment. Based upon our latest assessment, we determined that our goodwill was not impaired as of October 1, 2024. We will monitor future results and will perform a test if indicators trigger an impairment review.
Impairment Assessment – Goodwill Goodwill of a reporting unit is tested for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
Impairment Assessment – Goodwill CTS CORPORATION 27 Table of Contents Goodwill of a reporting unit is tested for impairment on the first day of its fiscal fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.
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 CTS CORPORATION 25 Table of Contents on our net leverage ratio.
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.
As of December 31, 2023, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and a cross-currency swap on $17,500 of our long-term debt through June 2027.
As of December 31, 2024, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and a cross-currency swap on $12,500 of our long-term debt through June 2027.
See Note 12, “Leases,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments. • Retirement obligations – Expected future contributions relating to our defined benefit postretirement plans were $5,781, with $750 payable in 12 months.
See Note 12, “Leases,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further detail of our obligations and the timing of expected future payments. • Retirement obligations – Expected future contributions relating to our defined benefit postretirement plans were $4,897, with $609 payable in 12 months.
CTS CORPORATION 26 Table of Contents Critical Accounting Estimates Goodwill, Intangibles and Other Long-Lived Assets Purchase Accounting We use the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition.
Critical Accounting Estimates Goodwill, Intangibles and Other Long-Lived Assets Purchase Accounting We use the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition.
The restructuring charges in the year ended December 31, 2023 were primarily related to costs associated with our plant closure and consolidation activities. See Note 9 “Costs Associated with Exit and Restructuring Activities” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further information.
The restructuring charges in the year ended December 31, 2024, were primarily related to costs associated with our plant closure and consolidation activities and severance expenses related thereto. See Note 9, “Costs Associated with Exit and Restructuring Activities,” in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further information.
In addition, we have $99,940 of foreign cash balances and our ability to repatriate these funds timely and in a tax efficient manner may be restricted. See “Item 1A. Risk Factors” for additional discussion of risks that our business faces.
In addition, we have $92,944 of foreign cash balances and our ability to repatriate these funds timely and in a tax efficient manner may be restricted. See Item 1A. "Risk Factors” for additional discussion of risks that our business faces.
See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. Cash Flows from Financing Activities Net cash used by financing activities for the year ended December 31, 2023, was $65,399.
See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. Cash Flows from Financing Activities Net cash used by financing activities for the year ended December 31, 2024, was $27,935.
Additionally, we have minimum contractual future interest payments on our hedged borrowings under our Revolving Credit Facility estimated to be $4,655 through maturity, with approximately $1,955 payable within 12 months based on the December 31, 2023 exchange rate. We may paydown certain portions of these obligations early.
Additionally, we have minimum contractual future interest payments on our hedged borrowings under our Revolving Credit Facility estimated to be $10,150 through maturity, with approximately $5,190 payable within 12 months based on the December 31, 2024 exchange rate. We may paydown certain portions of these obligations early.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $18,097, driven by capital expenditures of $14,738 and $3,359 of acquisition payments, primarily from the Maglab acquisition as well as final working capital adjustments from the TEWA and Ferroperm acquisitions.
Net cash used in investing activities for the year ended December 31, 2023 was $18,097, driven by capital expenditures of $14,738 and $3,359 of acquisition payments, primarily for the Maglab acquisition as well as final working capital adjustments from the TEWA Temperature Sensors SP. Zo.o and Meggitt A/S (a/k/a Ferroperm Piezoceramics A/S) acquisitions.
Components of net cash provided by operating activities included net earnings of $60,532, depreciation and amortization expense of $28,710, other net non-cash items totaling $3,108, offset by a net cash outflow from changes in assets and liabilities of $(3,539) primarily driven by reductions in accounts payable and accrued payroll and benefits as a result of lower sales and incentive compensation accruals.
Components of net cash provided by operating activities included net earnings of $60,532, depreciation and amortization expense of $28,710, other net non-cash items CTS CORPORATION 25 Table of Contents totaling $3,108, offset by a net cash outflow from changes in assets and liabilities of $(3,539) primarily driven by reductions in accounts payable and accrued payroll and benefits.
Research and development (“R&D”) expenses were $24,918, or 4.5% of sales in 2023 compared to $24,100, or 4.1% of sales in 2022, in line with our commitment to continue investing in research and product development to drive organic growth. Restructuring charges were $7,074, or 1.3% of net sales in 2023, compared to $1,912, or 0.3% of net sales in 2022.
Research and development expenses were $23,388, or 4.5% of sales in 2024, compared to $24,918, or 4.5% of sales in 2023, in line with our commitment to continue investing in research and product development to drive organic growth. Restructuring charges were $4,697, or 0.9% of net sales in 2024, compared to $7,074, or 1.3% of net sales in 2023.
As of December 31, 2023, our material cash requirements for our known contractual and other obligations were as follows: • Long-term debt, including interest – Outstanding principal on our Revolving Credit Facility was $67,500 at December 31, 2023, with no amounts payable within 12 months.
CTS CORPORATION 26 Table of Contents As of December 31, 2024, our material cash requirements for our known contractual and other obligations were as follows: • Long-term debt, including interest – Outstanding principal on our Revolving Credit Facility was $91,253 at December 31, 2024, with no amounts payable within 12 months.
The net cash outflow was the result of treasury stock purchases of $40,926, net cash for debt paydowns of $16,170, dividend payments of $5,040, and taxes paid on behalf of equity award participants of $3,263. Net cash provided by financing activities for the year ended December 31, 2022, was $4,336.
The net cash outflow was the result of treasury stock purchases of $40,926, net cash for debt paydowns of $16,170, dividend payments of $5,040, and taxes paid on behalf of equity award participants of $3,263.
Total debt as of December 31, 2023 and December 31, 2022 was $67,500 and $83,670, respectively. Cash Flows from Operating Activities Net cash provided by operating activities was $88,811 during the year ended December 31, 2023.
Total debt as of December 31, 2024 and December 31, 2023 was $91,253 and $67,500, respectively. Cash Flows from Operating Activities Net cash provided by operating activities was $99,289 during the year ended December 31, 2024.
However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions. CTS CORPORATION 24 Table of Contents Cash and cash equivalents were $163,876 at December 31, 2023 and $156,910 at December 31, 2022, of which $99,940 and $90,244, respectively, were held outside the United States.
However, we may choose to pursue additional equity and debt financing to provide additional liquidity or to fund acquisitions. Cash and cash equivalents were $94,334 at December 31, 2024 and $163,876 at December 31, 2023, of which $92,944 and $99,940, respectively, were held outside the United States.
Other expense, net for 2023 is primarily driven by foreign currency losses primarily related to the Chinese Renminbi offset partially by income from the qualified replacement plan assets.
Interest expense increased due to higher borrowings to fund the SyQwest acquisition. Other expense, net for 2024 is primarily driven by foreign currency translation losses primarily related to the Chinese Renminbi offset partially by income from the qualified replacement plan assets.
GAAP requires a liability to be recorded for contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. We record environmental contingent loss accruals on an undiscounted basis. Significant judgment is required to determine the existence and amounts of our environmental liabilities.
We believe our reserve level is appropriate considering the quantities and quality of the inventories. Environmental Contingencies U.S. GAAP requires a liability to be recorded for contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. We record environmental contingent loss accruals on an undiscounted basis.
Other income and expense items are summarized in the following table: Years Ended December 31, 2023 2022 Interest expense $ (3,331 ) $ (2,192 ) Interest income 4,625 1,326 Other expense (1,192 ) (11,403 ) Total other (expense), net $ 102 $ (12,269 ) Interest income increased due to investments of available cash into short-term, cash equivalent, high yield deposit accounts.
Other income and expense items are summarized in the following table: Years Ended December 31, 2024 2023 Interest expense $ (4,236 ) $ (3,331 ) Interest income 4,282 4,625 Other expense (1,603 ) (1,192 ) Total other (expense) income, net $ (1,557 ) $ 102 Interest income decreased due to lower investments of available cash into short-term, cash equivalent, high-yield deposit accounts as a result of the SyQwest acquisition.
See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. Net cash used in investing activities for the year ended December 31, 2022 was $111,188, driven by the acquisition payments for the TEWA and Ferroperm acquisitions of $96,855 and capital expenditures of $14,333.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2024 was $140,556, driven by $121,912 of acquisition payments for the SyQwest acquisition and capital expenditures of $18,643. See Note 3, "Business Acquisitions," in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
We regularly consult with attorneys and consultants to determine the relevant facts and circumstances before we record a liability. Changes in the estimates on which the accruals are based, unanticipated government enforcement action, or changes in health, safety, environmental, and chemical control regulations and testing requirements could, and have, resulted in higher or lower costs.
Changes in the estimates on which the accruals are based, unanticipated government enforcement action, or changes in health, safety, environmental, and chemical control regulations and testing requirements could, and have, resulted in higher or lower costs.
Our reserves contain uncertainties because the calculation requires management to make assumptions and to apply judgment regarding historical experience, market conditions, and product life cycles. Changes in actual demand or market conditions could adversely impact our reserve calculations.
Our reserves contain uncertainties because the calculation requires management to make assumptions and to apply judgment regarding historical experience, market conditions, and product life cycles. Changes in actual demand or market conditions could adversely impact our reserve calculations. Over the last three years, our reserves for excess and obsolete inventories have ranged from 14.8% to 20.7% of gross inventory.
The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage our underlying businesses. The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage our underlying businesses.
We are subject to challenges including periodic market softness, competition from other suppliers, changes in technology, and the ability to add new customers, launch new products or penetrate new markets. On February 6, 2023, we acquired 100% of the outstanding shares of maglab AG ("Maglab") for $4,164 in cash subject to additional earnout payments based on future performance.
We are subject to challenges including periodic market softness, competition from other suppliers, changes in technology, and the ability to add new customers, launch new products or penetrate new markets.
The net cash payment of $72,340 for this acquisition was funded by a combination of cash on hand and borrowings under our Revolving Credit Facility. On February 6, 2023, we acquired 100% of the outstanding shares of Maglab for $4,164 in cash subject to additional earnout payments based on future performance. The acquisition was funded from cash on hand.
The acquisition was funded from cash on hand. On July 29, 2024, we acquired 100% of the outstanding membership interests of SyQwest for $121,912 in cash subject to additional earnout payments based on future performance. The acquisition was funded from both cash on hand and borrowings under our Revolving Credit Facility.
Operating lease obligations were $37,856, with $6,215 payable within 12 months.
Operating lease obligations were $25,839 with $4,719 payable within 12 months.
We have no off-balance sheet arrangements that have a material current effect or are reasonably likely to have a material future effect on our financial condition or changes in our financial condition. Acquisitions On February 28, 2022, we acquired TEWA, a designer and manufacturer of high-quality temperature sensors.
We have no off-balance sheet arrangements that have a material current effect or are reasonably likely to have a material future effect on our financial condition or changes in our financial condition. Acquisitions On February 6, 2023, we acquired 100% of the outstanding shares of Maglab for $4,164 in cash subject to additional earnout payments based on future performance.
Selling, general and administrative ("SG&A") expenses were $83,816, or 15.2% of sales for the year ended December 31, 2023, versus $91,520 or 15.6% of sales in 2022. The decrease in SG&A expenses was primarily driven by lower incentive compensation associated with lower financial performance as well as cost reduction measures implemented due to challenging market conditions.
Selling, general and administrative ("SG&A") expenses were $88,285, or 17.1% of sales for the year ended December 31, 2024, versus $83,816 or 15.2% of sales in 2023. The increase in SG&A expenses was primarily driven by increased incentive compensation and the SyQwest acquisition.
Years Ended December 31, 2023 2022 Effective tax rate 19.5% 26.2% The effective income tax rate in 2023 was 19.5% compared to 26.2% in the prior year.
Years Ended December 31, 2024 2023 Effective tax rate 18.4% 19.5% The effective income tax rate in 2024 was 18.4% compared to 19.5% in the prior year. The decrease is primarily due to a change in mix of earnings taxed at lower rates.
Gross margin was $190,859 for the year ended December 31, 2023, a decrease of $19,679 or 9.3% from the year ended December 31, 2022. The decrease in gross margin was driven by lower sales volumes as well as changes in foreign exchange rates of $6,247 primarily due to the U.S. Dollar appreciating compared to the Chinese Renminbi and Peso.
The decrease in gross margin was primarily driven by lower sales volumes partially offset by the favorable impact of changes in end market mix, operational improvements as well as favorable impacts in foreign exchange rates of $1,102 primarily due to the U.S. Dollar appreciating compared to the Peso.
Components of net cash provided by operating activities included net earnings of $59,575, depreciation and amortization expense of $29,753, other net non-cash items totaling $10,260, and a net cash inflow from changes in assets and liabilities of $21,609 primarily driven by $34,016 received from the U.S. pension plan termination.
Components of net cash provided by operating activities included net earnings of $58,114, depreciation and amortization expense of $30,922, other net non-cash items totaling $2,907, and a net cash inflow from changes in assets and liabilities of $7,346 primarily driven by reductions in inventories. Net cash provided by operating activities was $88,811 during the year ended December 31, 2023.
The net cash inflow was the result of net cash from debt of $33,638 associated with completed acquisitions, partially offset by treasury stock purchases of $21,447, dividend payments of $5,131, taxes paid on behalf of equity award participants of $1,524, and contingent consideration payments of $1,200.
The net cash outflow was the result of treasury stock purchases of $42,596, dividend payments of $4,885, taxes paid on behalf of equity award participants of $3,131 and contingent consideration payments of $1,076, partially offset by borrowings net of payments of $23,753. Net cash used by financing activities for the year ended December 31, 2023, was $65,399.
Removed
Maglab has deep expertise in magnetic system design and current measurement solutions for use in e-mobility, industrial automation, and renewable energy applications. Maglab's domain expertise coupled with CTS’ commercial, technical and operational capabilities position us to advance our status as a recognized innovator in electric motor sensing and controls markets.
Added
On July 29, 2024, we acquired 100% of the outstanding membership interests of SyQwest, LLC (“SyQwest”), a leading designer and manufacturer of a broad set of sonar and acoustic sensing solutions primarily for naval applications, for $121.9 million, net of cash and up to $15 million in future contingent consideration.
Removed
The decline in net sales was primarily driven by decreased volume of industrial and commercial vehicle products. Net sales to the non-transportation markets decreased $34,203 or 12.1%, while net sales to the transportation markets decreased $2,245 or 0.8%. CTS CORPORATION 23 Table of Contents The TEWA Temperature Sensors SP. Zo.o.
Added
The SyQwest acquisition strengthens our strategy and scale in the defense end market. The acquisition was funded from both cash on hand and borrowings under our revolving credit facility.
Removed
(“TEWA”) and Meggitt A/S (a/k/a Ferroperm Piezoceramics A/S, “Ferroperm”) acquisitions, both completed in 2022, added net sales of $37,460 and $23,477 in 2023 and 2022, respectively, while the Maglab acquisition added net sales of $1,755 in 2023. Changes in foreign exchange rates decreased net sales by $2,459 year-over-year primarily due to the U.S. Dollar appreciating compared to the Chinese Renminbi.
Added
The decline in net sales was primarily driven by a decreased volume of transportation products, which were down $51,077, or 16.9%. Net sales to the diversified end markets increased $16,425, or 6.6%. The SyQwest acquisition added net sales of $14,448 in 2024, while the acquisition of maglab AG ("Maglab") added net sales of $1,755 in 2023.
Removed
Other expense, net for 2022 was primarily driven by $6,803 in excise taxes incurred as part of the U.S. pension plan termination and $1,776 in derivative losses associated with the acquisition of Ferroperm, as well as foreign currency losses primarily related to the Chinese Renminbi offset partially by income from the U.S. pension plan investments realized prior to its final termination.
Added
CTS CORPORATION 24 Table of Contents Gross margin was $189,150 for the year ended December 31, 2024, a decrease of $1,709, or 0.9%, from the year ended December 31, 2023.
Removed
The decrease is primarily attributed to 2023 tax benefits associated with foreign tax credits related to a 2023 tax law change, research and development credits, and lower discrete tax impacts associated with executive incentive compensation and pension termination costs.
Added
CTS CORPORATION 28 Table of Contents The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations.
Removed
Net cash provided by operating activities was $121,197 during the year ended December 31, 2022.
Added
Significant judgment is required to determine the existence and amounts of our environmental liabilities. We regularly consult with attorneys and consultants to determine the relevant facts and circumstances before we record a liability.
Removed
The net cash payment of $24,515 for this acquisition was funded by the Company's cash on hand. On June 30, 2022, we acquired Ferroperm, a designer and manufacturer of high performance piezoceramic components for use in complex and demanding medical, industrial, and aerospace applications.
Removed
CTS CORPORATION 28 Table of Contents Over the last three years, our reserves for excess and obsolete inventories have ranged from 13.7% to 17.4% of gross inventory. We believe our reserve level is appropriate considering the quantities and quality of the inventories. Environmental Contingencies U.S.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAccordingly, any gains or losses on this derivative instrument will be included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted or liquidated. Interest payments received for the cross currency-swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense in the Condensed Consolidated Statements of Earnings.
Biggest changeAccordingly, any gains or losses on this derivative instrument will be included in the foreign currency translation component of other comprehensive income until the net investment is sold, diluted or liquidated.
As of December 31, 2023, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and a cross-currency swap on $17,500 of our long-term debt through June 2027. A 100-basis point change in interest rates would not materially impact our total interest expense.
As of December 31, 2024, we had interest rate swaps that fix interest costs on $50,000 of our long-term debt through December 2026 and a cross-currency interest rate swap on $12,500 of our long-term debt through June 2027. A 100-basis point change in interest rates would not materially impact our total interest expense.
Our most significant raw materials and purchased components include conductive CTS CORPORATION 29 Table of Contents inks and contactors, passive connectivity components, integrated circuits and semiconductors, certain rare earth elements ("REEs"), ceramic powders, plastic components, molding compounds, printed circuit boards and assemblies, quartz blanks and crystals, wire harness assemblies, copper, brass, silver, gold, platinum, lead, aluminum, and steel-based raw materials and components.
Our most significant raw materials and purchased components include conductive inks and contactors, passive connectivity components, integrated circuits and semiconductors, certain rare earth elements ("REEs"), ceramic powders, plastic components, molding compounds, printed circuit boards and assemblies, quartz blanks and crystals, wire harness assemblies, copper, brass, silver, gold, platinum, lead, aluminum, and steel-based raw materials and components.
Foreign Currency Risk We are exposed to foreign currency exchange rate risks. Our significant foreign subsidiaries are located in China, Czech Republic, Denmark, Mexico, and Taiwan. During 2023, net sales from outside the U.S. were approximately 45% of total net sales. During 2022, net sales to customers from outside the U.S. were approximately 44% of total net sales.
Foreign Currency Risk We are exposed to foreign currency exchange rate risks. Our significant foreign subsidiaries are located in China, Czech Republic, Denmark, Mexico, and Taiwan. During 2024, net sales from outside the U.S. were approximately 42% of total net sales. During 2023, net sales from outside the U.S. were approximately 45% of total net sales.
The assumptions used in measuring fair value of the cross-currency swap are considered level 2 inputs, which are based upon the Krone to United States Dollar exchange rate market. At December 31, 2023, we had a net unrealized loss of $1,138 in accumulated other comprehensive income (loss).
The assumptions used in measuring fair value of the cross-currency interest rate swap are considered level 2 inputs, which are based upon the Krone to United States Dollar exchange rate market. At December 31, 2024, we had a net unrealized loss of $51 in accumulated other comprehensive (loss) income.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk (in thousands, except percentages) Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and commodity prices.
Item 7A. Quantitative and Qualita tive Disclosures About Market Risk (in thousands, except percentages) CTS CORPORATION 29 Table of Contents Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest rates and commodity prices.
Interest Rate Risk We are exposed to risk of changes in interest rates on our Revolving Credit Facility. There was $67,500 and $83,670 outstanding under our Revolving Credit Facility at December 31, 2023 and 2022, respectively.
Interest Rate Risk We are exposed to risk of changes in interest rates on our Revolving Credit Facility. There was $91,253 and $67,500 outstanding under our Revolving Credit Facility at December 31, 2024 and 2023, respectively.
Changes in foreign exchange rates could affect the Company’s sales, costs, balance sheet values and earnings; therefore, we have entered into foreign currency forward contracts with notional values of $13,548 and $31,787 as of December 31, 2023 to hedge our exposure against the Euro and Mexican Peso, respectively.
Changes in foreign exchange rates could affect the Company’s sales, costs, balance sheet values and earnings; therefore, we have entered into foreign currency forward contracts with notional values of $12,181 and $38,476 as of December 31, 2024 to hedge our exposure against the Euro and Mexican Peso, respectively.
Added
Interest payments received for the cross currency-swap interest rate swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense in the Condensed Consolidated Statements of Earnings.

Other CTS 10-K year-over-year comparisons