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CTS Corporation 3rd Quarter 2026 Earnings CallOctober 27, 2026
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Cautionary Statement Regarding Forward-Looking StatementsReaders are cautioned that the statements contained in this document regarding expectations of our performance or other matters that may affect our business, results of operations, or financialcondition are, or may be deemed to be, “forward-looking statements” as defined by the “safe harbor” provisions in the Private Securities Litigation Reform Act of 1995. Such statements are made inreliance on the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact,included or incorporated in this document, including statements regarding our strategy, financial position, guidance, funding for continued operations, cash reserves, liquidity, projected costs, plans,projects, awards and contracts, and objectives of management, among others, are forward-looking statements. Words such as “expect,” “anticipate,” “should,” “believe,” “hope,” “target,”“continued,” “project,” “plan,” “goals,” “opportunity,” “appeal,” “estimate,” “potential,” “predict,” “demonstrates,” “may,” “will,” “might,” “could,” “intend,” “shall,” “possible,” “would,”“approximately,” “likely,” “outlook,” “schedule,” “on track,” “poised,” “pipeline,” and variations of these terms or the negative of these terms and similar expressions are intended to identify theseforward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements are not guarantees of future performance,conditions or results. Forward-looking statements are based on management’s expectations, certain assumptions, and currently available information. Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject touncertainties. These forward-looking statements are made subject to certain risks, uncertainties, and other factors, which could cause CTS’ actual results, performance, or achievements to differmaterially from those presented in the forward-looking statements. Examples of factors that may affect future operating results and financial condition include, but are not limited to: supply chaindisruptions (including, but not limited to, the availability and cost of rare earth elements, minerals and metals); changes in the economy generally, including inflationary and/or recessionary conditionsand increased tariffs, and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the funding of contracts by the U.S. Government; the results of actions toreposition CTS’ business; rapid technological change; general market conditions in the transportation, as well as conditions in the industrial, aerospace and defense, and medical markets; reliance onkey customers; unanticipated public health crises, natural disasters or other events; environmental compliance and remediation expenses; the ability to protect CTS’ intellectual property; pricingpressures and demand for CTS’ products; risks associated with CTS’ international operations, including trade and tariff barriers, trade pacts, including the future of the USMCA, exchange rates andpolitical and geopolitical risks (including, without limitation, the impact of tariffs on China, Canada and Mexico, and other nations, the potential impact of U.S./China relations and the impact ofgeopolitical conflicts may have on our business, results of operations and financial condition; write offs of goodwill on our balance sheet; changes in existing tax laws or adoption of new tax laws; theamount and timing of any share repurchases; and the effect of any cybersecurity incidents on our business. Many of these, and other risks and uncertainties, are discussed in further detail in Item 1A.of CTS's most recent Annual Report on Form 10-K and other filings made with the SEC. CTS undertakes no obligation to publicly update CTS’ forward-looking statements to reflect new information orevents or circumstances that arise after the date hereof, including market or industry changes. CTS refers to the forward-looking measures of book-to-bill ratio and total booked business in this document. Book-to-bill ratio is the ratio of customer orders received to revenues recorded for thesame period. Although the book-to-bill ratio reflects firm customer orders, changes such as terminations, amendments, or contract cancellations may occur which could result in a reduction to thecustomer orders. Total booked business reflects expected revenue from the remaining life of long-term agreements with transportation customers. Total booked business is adjusted periodically forchanges in expected revenue based on market information, fluctuations in foreign currency exchange rates, information from our customers, and any other factors that may impact the expectedrevenue from these agreements. Book-to-bill ratio and total booked business are not defined by U.S. GAAP and our methodology for calculating these measures may not be consistent with orcomparable to other similarly titled measures of other companies.2
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•Strong execution drives profitable growth- Revenue +5% YoY and +3% sequentially- Book-to-bill ratio2of 1.18- Adj. gross margin expanded 330 bps to 42.2%•Continued momentum in diversified end markets- Revenue +7% YoY, representing 60% of Q3 sales- Strong bookings with a Book-to-bill ratio2of 1.3•Modest growth in Transportation- Revenue +2% YoY, 1% sequentiallyNotes:All comparisons vs. same period in prior year unless otherwise noted.1 Adj. Gross Margin and Adj. Earnings per Share are non-GAAP financial measures. Refer to the Appendix for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.2 Refer to slide 2 for information on book-to-bill ratio.3 Q3 2026 – Diversification Momentum and Strong Execution Drive Record Profitability$150MRevenue+5% Third Quarter42.2%Adj. Gross Margin1+330 bps$0.77Adj. Diluted EPS1+$0.17Advancing Our Strategy: Diversification, Profitable Growth & Disciplined Capital Deployment
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Millar Acquisition – Advancing Portfolio Diversification Expanding CTS into attractive markets with differentiated sensing technologies Precision pressure sensing for medical, life sciences and industrial applications55+ yearsSensing expertise across the U.S. and Europe~$30MExpected annual revenue2H 2027Accretive Neurological monitoring Cardiovascular Implantable sensing Industrial / water qualityDifferentiated capabilities•MEMS pressure, pH and conductivity•Integrated design, microfabrication and manufacturingPortfolio diversification•Complementary technologies and customer relationships•New growth opportunities through CTS’s global reach2
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Medical 5 Aerospace & Defense End Markets Update $22 $28 $27 Q3 2025Q2 2026Q3 2026($ Millions)Revenue$25 $18 $24 Q3 2025Q2 2026Q3 2026($ Millions)Revenue•Strong sales growth of 21% YoY; down 4% sequentially•Book-to-bill of 0.7, with bookings down 5% YoY due to timing of orders•Key wins across implantable pacemakers, ultrasound diagnostics, precision measurement and therapeutic applications•Sales down 7% YoY; up 30% sequentially•Strong bookings for the second consecutive quarter; Book-to-bill of 1.9 and bookings +102% YoY•Successfully scaling a critical sensing solution for a U.S. Navy undersea warfare application
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End Markets Update 6 Industrial •Sales up 7% YoY and 1% sequentially•Strong bookings with Book-to-bill of 1.36•Multiple design wins across data centers, automation, connectivity, digitalization and energy efficiency•New customer win in temperature sensing($ Millions)Revenue 1Refer to slide 2 for information on total booked business.Transportation •Sales up 2% YoY and 1% sequentially•$1.2b total booked business1at end of Q3 2026•Continued momentum across eBraketechnology, foot controls and sensing applications•New customer win in seat-track position sensing$59 $59 $60 Q3 2025Q2 2026Q3 2026($ Millions)Revenue$37 $40 $40 Q3 2025Q2 2026Q3 2026
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$2.22 $2.12 $2.23 2023 2024 2025 2026F$2.882$2.78 Notes:1Adjusted Diluted EPS is a non-GAAP financial measure. Refer to the Appendix for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.2Revenue and EPS guidance include the expected impact from the Millar acquisition. FY 2026 Updated GuidanceRevenue($ Millions)Adjusted Diluted EPS 1$550 $515 $541 2023 2024 2025 2026F$580$590 2-Continuation of current market conditions – Ongoing monitoring of near-term economic impacts, including geopolitical conflicts, tariff changes, precious metals, and petroleum-based products, with a focus on agility in cost and pricing actions-Continued progress on growth in diversified end markets-Light vehicle production expected to be flat to slightly down, partially offset by commercial vehicle volumes-Effective tax rate expected to be in the range of 20–22%, excluding discrete itemsKey Outlook Assumptions7
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Financials8
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Notes:All comparisons vs. same period in prior year unless otherwise noted.1Adj. Diluted EPS, Adj. Gross Margin and Adj. EBITDA Margin are non-GAAP financial measures. Refer to the Appendix for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. •Revenue up 5% year over year and 3% sequentially•Diversified end market revenue up 7% vs Q3 2025•Transportation revenue up 2% year-over-year •Adjusted gross margin +330 bps vs. Q3 2025, driven by operations, mix, and FX benefit•Adjusted EBITDA up 90 bps vs Q3 2025•Monitoring USMCA, tariff changes, metals/oil inflation•FX favorability of approximately 4 cents to EPSNet Income $13.7 $19.2 $17.8Diluted EPS $0.46 $0.66 $0.61Adj. Diluted EPS1$0.60 $0.74 $0.77Adj. Gross Margin138.9% 41.5% 42.2%Adj. EBITDA Margin123.8% 25.4% 24.7%$143 $145 $150 Q3 2025 Q2 2026 Q3 2026RevenueQ3 2026 Financial SummaryResults($ Millions, except percentages and per share amounts)Highlights 9
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$73 $73 $94 2024 2025 2026Cash and Debt1$19MCash Returned to Shareholders YTD Q3 20263$82MYTD Q3 2026 Free Cash Flow2 Strong Balance SheetSolid Foundation for Strategic M&A$12MYTD Q3 2026 Capital Expenditures10 $144$55$300Cash DebtBorrowedTotal FacilityQ3 YTD Operating Cash FlowPrioritizing strong cash flow generation($ Millions) ($ Millions) Notes:1Cash and Debt balance as of September 30, 20262 Free Cash Flow is a non-GAAP financial measure. Refer to the Appendix for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.3 Cash Returned to Shareholders consists of share repurchases & dividends.
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Q & A
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Appendix
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13 Non-GAAP Financial MeasuresFrom time to time, CTS may use non-GAAP financial measures in discussing CTS’ business. These measures are intended to supplement, not replace, CTS’ presentation of its financial results in accordance withU.S. GAAP. CTS believes that the non-GAAP financial measures presented are commonly used by financial analysts and others in the industries in which CTS operates, and thus further provide usefulinformation to investors. CTS’ definitions of these non-GAAP financial measures may differ from those terms as defined or used by other companies. Non-GAAP measures should not be used by investors orthird parties as the sole basis for formulating investment decisions, as they may exclude a number of important cash and non-cash recurring items.CTS has presented these non-GAAP financial measures as it believes that the presentation of its financial results that exclude (1) restructuring charges; (2) restructuring-related charges; (3) environmentalcharges; (4) acquisition-related adjustments; (5) inventory fair value step-up costs; (6) foreign exchange (gains) losses; (7) non-cash pension expenses (income); and (8) non-recurring insurance recoveryproceeds and (9) certain discrete tax items are useful and assist in comparing CTS’ current operating results with past periods and with the operational performance of other companies in its industry.Included below is a description of the expenses that CTS has determined are not normal, recurring cash operating expenses necessary to operate its business and the rationale for why providing financialmeasures for its business with such expenses excluded or adjusted is useful to investors as a supplement to the U.S. GAAP measures.•Restructuring charges – costs primarily relating to workforce reductions, building and equipment relocations, asset impairment charges and other facility closure activities in connection with our continuedoptimization of our organization.•Restructuring-related charges – costs related to restructuring actions that do not qualify as direct restructuring charges under U.S. GAAP. These include duplicative expenses incurred due to plantconsolidation related transition activities such as excess rent, utilities, personnel related and other costs incurred prior to the start of production at the new location.•Environmental charges – costs associated with our non-operating facilities that are unrelated to ongoing operations. Currently, none of these costs and accruals relate to sites that provide revenuegenerating activities for the Company.•Acquisition-related adjustments – diligence and transaction costs related to acquisitions including related contingent earnout and other adjustments.•Inventory fair value step-up costs – purchase accounting-related inventory costs from acquisitions.•Foreign exchange (gains) losses – remeasurement income and expenses for non-U.S. subsidiaries with the U.S. dollar as the functional currency.•Non-cash pension expenses (income) – pension income and expenses relating to the non-operating U.S. pension and post-retirement life insurance plans, including historical plan settlement activities.•Insurance recovery – recovery relating to non-recurring insurance claims•Discrete tax items – non-recurring, infrequent, or unusual tax adjustments (e.g., valuation allowances, uncertain tax position changes, unremitted assertion changes and discrete impacts associated withpre-tax non-GAAP items or due to tax law changes, etc.).At times, the reconciliations below have been intentionally rounded to the nearest thousand, or $0.01 for EPS figures, and, therefore, may not sum.CTS does not provide reconciliations of forward-looking non-GAAP financial measures, such as estimated adjusted diluted earnings per share, to the most comparable GAAP financial measures on a forward-looking basis because CTS is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to theinherent difficulty of forecasting the timing and amount of certain items, such as, but not limited to, restructuring costs, environmental remediation costs, acquisition-related costs, foreign exchange rates andother non-routine costs. Each of such adjustments has not yet occurred, are out of CTS' control and/or cannot be reasonably predicted. For the same reasons, CTS is unable to address the probablesignificance of the unavailable information.
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14 Regulation G Schedules($ Millions, except percentages)Adjusted Gross MarginTwelve Months EndedDecember 31,Three Months Ended June 30, Nine Months EndedSeptember 30,Three Months EndedSeptember 30,20232024202520262025202620252026$ 190.9 $ 187.6 $ 208.0 $ 60.0 $ 154.3 $ 178.2 $ 55.3 $ 63.2 Gross margin$ 550.4 $ 514.8 $ 541.3 $ 144.8 $ 404.0 $ 433.6 $ 143.0 $ 149.6 Net sales34.7%36.4%38.4%41.5%38.2%41.1%38.7%42.2%Gross margin as a % of net salesAdjustments to reported gross margin:0.6 0.7 0.2 —0.2 —0.2 —Restructuring-related charges (b) —2.1 ——————Inventory fair value step-up (b) $ 191.4 $ 190.4 $ 208.2 $ 60.0 $ 154.5 $ 178.2 $ 55.6 $ 63.2 Adjusted gross margin34.8%37.0%38.5%41.5%38.2%41.1%38.9%42.2%Adjusted gross margin as a % of net sales
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15 Regulation G Schedules($ Millions, except percentages)Adjusted Operating EarningsTwelve Months EndedDecember 31,Nine Months EndedSeptember 30,Three Months EndedSeptember 30,2023202420252025202620252026$ 75.1 $ 71.2 $ 82.6 $ 60.0 $ 74.3 $ 20.9 $ 25.5 Operating earnings$ 550.4 $ 514.8 $ 541.3 $ 404.0 $ 433.6 $ 143.0 $ 149.6 Net sales13.6%13.8%15.3%14.8%17.1%14.6%17.1%Operating earnings as a % of net salesAdjustments to reported operating earnings:7.1 4.7 1.4 1.0 0.9 0.3 0.5 Restructuring charges (c) 0.6 0.7 0.7 0.4 0.2 0.4 0.1 Restructuring-related charges (b) 3.5 1.6 5.5 4.7 0.9 4.2 0.2 Environmental charges (a) 0.4 (0.3)(3.4)(2.6)1.3 (1.1)1.2 Acquisition-related adjustments (a) —2.1 —————Inventory fair value step-up (b) $ 11.5 $ 8.8 $ 4.2 $ 3.5 $ 3.3 $ 3.8 $ 2.0 Total adjustments to reported operating earnings$ 86.6 $ 80.0 $ 86.9 $ 63.4 $ 77.7 $ 24.8 $ 27.5 Adjusted operating earnings15.7%15.5%16.0%15.7%17.9%17.3%18.4%Adjusted operating earnings as a % of net sales
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16 Regulation G Schedules($ Millions, except percentages)Adjusted EBITDA MarginTwelve Months EndedDecember 31,Three Months Ended June 30, Nine Months EndedSeptember 30,Three Months EndedSeptember 30,20232024202520262025202620252026$ 60.5 $ 55.5 $ 65.3 $ 19.2 $ 45.6 $ 54.1 $ 13.7 $ 17.8 Net earnings$ 550.4 $ 514.8 $ 541.3 $ 144.8 $ 404.0 $ 433.6 $ 143.0 $ 149.6 Net sales11.0%10.8%12.1%13.2%11.3%12.5%9.6%11.9%Net earnings margin28.7 30.9 34.5 8.8 25.9 26.3 8.8 8.7 Depreciation and amortization expense 3.3 4.2 4.3 0.7 3.4 2.0 1.1 0.6 Interest expense 14.6 13.1 18.5 7.1 13.2 32.0 6.0 20.5 Tax expense 107.2 103.7 122.6 35.7 88.1 114.5 29.7 47.6 EBITDA 19.5%20.1%22.6%24.7%21.8%26.4%20.7%31.8%EBITDA MarginAdjustments to EBITDA:7.1 4.7 1.4 0.1 1.0 0.9 0.3 0.5 Restructuring charges (c)0.6 0.7 0.7 0.1 0.4 0.2 0.4 0.1 Restructuring-related charges (b)3.5 1.6 5.5 0.4 4.7 0.9 4.2 0.2 Environmental charges (a)0.4 (0.3)(5.6)0.1 (2.6)1.3 (1.1)1.2 Acquisition-related adjustments (a)—2.1 ——————Inventory fair value step-up (b)—0.2 0.1 —0.1 ———Non-cash pension and related expense (d)2.0 2.7 (1.3)0.4 (0.7)0.4 0.6 (0.1)Foreign currency loss (gain) (d)—————(12.5)—(12.5)Insurance recovery (d)13.511.7 0.91.0 2.8 (8.7)4.4 (10.6)Total adjustments to EBITDA$ 120.7 $ 115.4 $ 123.4$ 36.8 $ 90.9 $ 105.7 $ 34.1 $ 37.0 Adjusted EBITDA 21.9%22.4%22.8%25.4%22.5%24.4%23.8%24.7%Adjusted EBITDA Margin
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17 Regulation G Schedules($ Millions, except percentages and per share amounts)Adjusted Net Earnings and Adjusted Diluted Earnings Per Share Three Months Ended June 30,Nine Months EndedSeptember 30,Three Months EndedSeptember 30,` 2026202620252025202620262025202520262026Per sharePer sharePer sharePer SharePer Share$ 0.66 $ 19.2 $ 1.52 $ 45.6 $ 1.87 $ 54.1 $ 0.46 $ 13.7 $ 0.61 $ 17.8 Net earnings (A)Adjustments to reported net earnings:0.00 0.1 0.03 1.0 0.03 0.9 0.01 0.3 0.020.5 Restructuring charges (c)0.00 0.1 0.01 0.4 0.01 0.2 0.01 0.4 0.000.1 Restructuring related charges (a)0.01 0.4 0.16 4.7 0.03 0.9 0.14 4.2 0.010.2 Environmental charges (a)0.00 0.1 (0.09)(2.6)0.05 1.3 (0.03)(1.1)0.04 1.2 Acquisition-related adjustments (a)——————————Non-cash pension and related expense (d)0.01 0.4 (0.02)(0.7)0.01 0.4 0.02 0.6 (0.00)(0.1)Foreign currency loss (gain) (d)————(0.43)(12.5)0.00 —(0.43)(12.5)Insurance recovery (d)$ 0.04 $ 1.0 $ 0.09 $ 2.8 $ (0.30)$ (8.7)$ 0.15 $ 4.4 $ (0.37)$ (10.6)Total pretax adjustments to reported net earnings(0.00)(0.1)(0.03)(1.0)0.08 2.2 (0.03)(1.0)0.09 2.5 Income tax effect of above adjustments (f)$ 0.03 $ 0.9 $ 0.06 $ 1.8 $ (0.23)$ (6.5)$ 0.12 $ 3.4 $ (0.28)$ (8.1)Total adjustments, tax affected (f) (B)Tax adjustments:0.04 1.3 0.03 0.8 0.48 14.0 0.02 0.7 0.44 12.7 Other discrete tax items (e)$ 0.04 $ 1.3 $ 0.03 $ 0.8 $ 0.48 $ 14.0 $ 0.02 $ 0.7 $ 0.44 $ 12.7 Total tax adjustments(C) $ 0.74 $ 21.3 $ 1.61 $ 48.2 $ 2.13 $ 61.6 $ 0.60 $ 17.8 $ 0.77 $ 22.4 Adjusted net earnings (A+B+C) and Adjusted net earnings per share$ 144.8 $ 404.0 $ 433.6 $ 143.0 $ 149.6 Net sales13.2%11.3%12.5%9.6%11.9%Net earnings as a % of net sales14.7%11.9%14.2%12.4%15.0%Adjusted net earnings as a % of net sales
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18 Regulation G Schedules($ Millions, except percentages and per share amounts)Adjusted Net Earnings and Adjusted Diluted Earnings Per Share NOTE: CTS believes that adjusted gross margin, adjusted operating earnings, adjusted EBITDA margin, adjusted net earnings and adjusted diluted earnings per share provide useful information to investors regarding its operational performance because they enhance an investor’s overall understanding of CTS’ core financial performance and facilitate comparisons to historical results of operations, by excluding items that are not related directly to the underlying performance of CTS’ fundamental business operations (such as those items noted above in the paragraph titled “Non-GAAP Financial Measures”) or were not part of CTS’ business operations during a comparable period. Twelve Months EndedDecember 31,202320232024202420252025Per sharePer sharePer share$1.92 $60.5 $1.80 $55.5 $2.19 $65.3 Net earnings (loss) (A)Adjustments to reported net earnings (loss):0.22 7.1 0.15 4.7 0.05 1.4 Restructuring charges (c)0.02 0.6 0.02 0.7 0.02 0.7 Restructuring related charges (a)0.11 3.5 0.05 1.6 0.18 5.5 Environmental charges (a)0.01 0.4 (0.01)(0.3)(0.19)(5.6)Acquisition-related adjustments (a)——0.07 2.1 ——Inventory fair value step-up (b)——0.01 0.2 0.00 0.1 Non-cash pension and related expense (d)0.06 2.0 0.09 2.7 (0.04)(1.3)Foreign currency (gain) loss (d)$0.42 $13.5 $0.38 $11.7 $0.03 $0.9 Total pretax adjustments to reported net earnings (loss)(0.07)(2.4)(0.07)(2.2)(0.02)(0.6)Income tax effect of above adjustments (f)$0.35 $11.1 $0.31 $9.5 $0.01 $0.3 Total adjustments, tax affected (f) (B)Tax adjustments:——————Increase in valuation allowances (e)(0.05)(1.6)0.01 0.3 0.03 0.8 Other discrete tax items (e)$ (0.05)$ (1.6)$0.01 $0.3 $0.03 $0.8 Total tax adjustments(C) $2.22 $70.0 $2.12 $65.3 $2.23 $66.3 Adjusted net earnings (A+B+C) and Adjusted Net Earnings Per Share$550.4 $514.8 $541.3 Net sales11.0%10.8%12.1%Net earnings (loss) as a % of net sales12.7%12.7%12.3%Adjusted net earnings as a % of net sales
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a) Reflected in Selling, general and administrative and other income (expense), net.b) Reflected in Cost of goods sold.c) Reflected in Restructuring charges.d) Reflected in Other income (expense), net.e) Reflected in Income tax expense. For 2023, discrete tax items include adjusting for tax benefits resulting from $0.6 million for research and development tax credits from prior years, $0.8 million in foreign tax credits related to prior years from a 2023 tax law change, as well as $0.2 million from the release of uncertain tax benefits. For 2024, the discrete tax items relate to items we deemed outside normal cash-generating operations including the addition of a valuation allowance for a foreign subsidiary. For 2025, the discrete tax items relate to items we deemed outside normal cash-generating operations including the addition of a valuation allowance for research and developmental credits and the tax impacts of an immaterial correction of a prior period error. For 2026, the discrete tax items relate to items we deemed outside normal cash-generating operations including the addition of a valuation allowance for foreign tax credits and adjustments related to uncertain tax positions.f) We determine the tax effect of non-GAAP adjustments by considering the tax laws and statutory income tax rates applicable in the tax jurisdictions of the underlying non-GAAP adjustments. For all periods presented, we applied the statutory income tax rates to the taxable portion of all of our adjustments. Our acquisition costs and foreign currency gains and losses included in our non-GAAP adjustments were not deductible for income tax purposes; therefore, no statutory income tax rate was applied to such costs.19 Regulation G Schedules
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($ Millions, except percentages)Free Cash Flow 20($ Millions, except percentages)Controllable Working CapitalNOTE: CTS believes the controllable working capital ratio is a useful measure because it provides an objective measure of the efficiency with which CTS manages its short-term capital needs. NOTE: CTS believes that free cash flow is a useful measure because it demonstrates the company’s ability to generate cash. Free cash flow is a non-GAAP measure and should be considered in addition to, butnot as a substitute for, information contained in the company's condensed consolidated statement of cash flows as a measure of liquidity.Regulation G SchedulesTwelve Months EndedDecember 31,Three Months EndedSeptember 30,20232024202520252026$ 78.6 $ 77.6 $ 88.1 $ 85.9 $ 93.0 Net accounts receivable$ 60.0 $ 52.3 $ 52.9 $ 54.2 $ 62.4 Net inventory$ (43.5)$ (42.6)$ (48.2)$ (48.1)$ (50.6)Accounts payable$ 95.1 $ 87.3 $ 92.7 $ 92.0 $ 104.8 Controllable working capital$ 124.7 $ 126.4 $ 137.3 $ 143.0 $ 149.6 Quarter sales4 4 4 4 4 Multiplied by 4$ 498.8 $ 505.6 $ 549.1 $ 571.9 $ 598.3 Annualized sales19.1%17.3%16.9%16.1%17.5%Controllable working capital as a % of annualized sales Twelve Months EndedDecember 31,Nine Months EndedSeptember 30,Three Months EndedSeptember 30,2023202420252025202620252026$ 88.8 $ 98.2 $ 102.1 $ 72.9 $ 94.3 $ 29.0 $ 43.5 Net cash provided by operating activities(14.7)(18.6)(15.7)(12.5)(12.0)(4.8)(2.4)Capital expenditures$ 74.1 $ 79.6 $ 86.4 $ 60.4 $ 82.3 $ 24.2 $ 41.1 Free cash flow147%177%156%160%174%212%245%Operating cash flow as a percentage of net earnings74%85%83%80%89%85%118%Operating cash flow as a percentage of adjusted EBITDA106%122%130%125%134%136%184%Free cash flow as a percentage of adjusted net earnings