CTS CORP recently released its 10-Q report. CTS is a global manufacturer of sensors, connectivity components, and actuators, with operations in North America, Europe, and Asia. The company sells controls, pedals, sensors, switches, transducers, piezo sensing products, EMI/RFI filters, capacitors, resistors, RF filters, frequency control products, piezo microactuators, and rotary actuators to transportation, industrial, medical, aerospace, and defense customers, using sales engineers, independent representatives, and distributors. Headquartered in Lisle, Illinois, CTS was founded in 1896.
In Item 2, Management’s Discussion and Analysis, CTS said second-quarter 2026 net sales rose 7.0% to $144.8 million from $135.3 million a year earlier. Gross margin increased to $60.0 million from $52.4 million, and gross margin percentage improved to 41.5% from 38.7%. Operating earnings climbed 17.9% to $26.8 million, while net earnings rose 3.4% to $19.2 million, or $0.66 per diluted share, from $18.5 million, or $0.62 per diluted share.
For the first six months of 2026, net sales increased 8.8% to $284.0 million from $261.1 million. Gross margin advanced to $115.0 million from $99.0 million, and operating earnings rose 25.0% to $48.8 million. Net earnings for the period were $36.4 million, up 14.0% from $31.9 million, with diluted earnings per share of $1.26 compared with $1.06.
CTS said second-quarter sales to diversified end markets increased $10.9 million, or 14.6%, with continued growth in medical and industrial markets, while aerospace and defense declined because of the timing of contract awards. Transportation sales fell $1.4 million, or 2.3%. For the six-month period, diversified end-market sales rose $22.7 million, or 16.0%, and transportation sales increased $246,000, or 0.2%.
Selling, general and administrative expenses were $28.4 million in the quarter, up from $23.1 million, and $54.4 million for the first half, up from $46.7 million. CTS said the increases were driven mainly by higher incentive compensation tied to company performance and, in the prior-year periods, a reduction to an acquisition earnout liability. Research and development spending declined to $4.8 million in the quarter from $6.3 million, and to $11.4 million for the half from $12.5 million, helped by a $1.634 million one-time customer reimbursement.
Other expense, net was $563,000 in the quarter versus other income, net of $251,000 a year earlier, and was $872,000 for the first half versus $86,000 of income in the prior-year period. CTS attributed the change mainly to foreign currency losses, primarily related to the euro. Interest expense fell to $704,000 in the quarter from $1.1 million and to $1.4 million for the half from $2.3 million, reflecting lower borrowings on its revolving credit facility.
The effective tax rate increased to 27.0% in the second quarter from 19.4% a year earlier, and to 24.1% for the first half from 18.4%, mainly because CTS established valuation allowances against certain tax credits.
At June 30, 2026, cash and cash equivalents were $107.5 million, up from $82.3 million at year-end 2025, with $97.6 million held outside the United States. Long-term debt was $55.0 million, down from $57.5 million at December 31, 2025. CTS generated $50.7 million of operating cash flow in the first half, compared with $43.9 million a year earlier, and spent $9.6 million on capital expenditures. Financing cash outflow totaled $18.7 million, including $12.0 million of treasury stock purchases, $2.5 million of long-term debt payments, and $2.3 million of dividends.
CTS said its revolving credit facility totals $300.0 million, with $55.0 million drawn and $1.54 million in standby letters of credit, leaving $243.46 million available subject to covenant restrictions. On June 25, 2026, the company announced Pratik Trivedi would become president and chief executive officer effective July 6, 2026, succeeding Kieran O’Sullivan, who will remain on the board as executive chair. The market has reacted to these announcements by moving the company's shares 8.71% to a price of $65.67. For more information, read the company's full 10-Q submission here.
