CTS CORP Leases Disclosure
NOTE 12 — Leases
We lease certain land, buildings and equipment under non-cancellable operating leases used in our operations. Operating lease assets represent our right to use an underlying asset for the lease term. Operating lease liabilities represent the present value of lease payments over the lease term, discounted using an estimate of our secured incremental borrowing rate because none of our leases contain a rate implicit in the lease arrangement.
The operating lease assets and liabilities are adjusted to include the impact of any lease incentives and non-lease components. We have elected not to separate lease and non-lease components, which include taxes and common area maintenance in some of our leases. Variable lease payments that depend on an index or a rate are included in lease payments using the prevailing index or rate in effect at lease commencement.
Options to extend or terminate a lease are included in the lease term when it is reasonably likely that we will exercise that option. We occasionally enter into short term operating leases with an initial term of twelve months or less. These leases are not recorded in the Consolidated Balance Sheets.
We determine if an arrangement is a lease or contains a lease at its inception, which normally does not require significant estimates or judgments. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and we currently have no material sublease agreements.
Components of lease expense for the years ended December 31, 2025, 2024 and 2023 were as follows:
|
Years Ended |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Operating lease cost |
$ |
6,198 |
|
|
$ |
6,361 |
|
|
$ |
5,762 |
|
Short-term lease cost |
|
1,855 |
|
|
|
935 |
|
|
|
1,495 |
|
Total lease cost |
$ |
8,053 |
|
|
$ |
7,296 |
|
|
$ |
7,257 |
|
For the years ended December 31, 2025, 2024 and 2023 the Company recorded sublease income of $533, $526 and $532, respectively.
Supplemental cash flow information related to leases was as follows:
|
|
Years Ended |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Cash paid for amounts included in the measurement of lease obligations |
|
$ |
6,309 |
|
|
$ |
6,395 |
|
|
$ |
5,797 |
|
Leased assets obtained in exchange for new operating lease obligations |
|
$ |
4,663 |
|
|
$ |
1,053 |
|
|
$ |
7,831 |
|
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
||
|
|
As of December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Operating lease obligations |
|
$ |
3,453 |
|
|
$ |
4,719 |
|
Long-term operating lease obligations |
|
|
21,841 |
|
|
|
21,120 |
|
Total lease liabilities |
|
$ |
25,294 |
|
|
$ |
25,839 |
|
Weighted-average remaining lease terms (years) |
|
|
5.91 |
|
|
|
5.88 |
|
Weighted-average discount rate |
|
|
6.51 |
% |
|
|
6.54 |
% |
Remaining maturity of our existing lease liabilities as of December 31, 2025 was as follows:
|
|
Operating Leases(1) |
|
|
2026 |
|
$ |
4,887 |
|
2027 |
|
|
4,778 |
|
2028 |
|
|
4,753 |
|
2029 |
|
|
4,762 |
|
2030 |
|
|
3,401 |
|
Thereafter |
|
|
9,309 |
|
Total |
|
$ |
31,890 |
|
Less: interest |
|
|
(6,596 |
) |
Present value of lease payments |
|
$ |
25,294 |
|
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.