CPS 10-K & 10-Q changes, risk factors and insider trading

Raw material costs canhave berecently volatile.been volatile which has been further exacerbated by the changes to U.S. policies related to global trade and increased tariffs and trade restrictions. The principal raw materials to produce our products include synthetic rubber, carbon black, process oils, and plastic resins. Principal procured components are primarily made from plastic, carbon steel, aluminum and stainless steel. Material costs represented approximately 51%52% of our total cost of products sold in 2024.2025. The costs and availability of raw materials and manufactured components cancould continue to fluctuate due to factors beyond our control, includingsuch as aother resultgeopolitical events and the effects of existing and potential changes to U.S. policies related to global trade and increased tariffs and trade restrictions. Further, climate changechange. mayChanges have an adverse impact onin global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters, whichdisasters may adversely affect the availability or pricing for certain raw materials including natural rubber. A significant increase in the price of raw materials, or a restriction in their availability, could materially increase our operating costs and adversely affect our profitability because it is generally difficult to pass through these increased costs to our customers. While we entered into index pricing agreements with some of our customers which provide for a price adjustment based on quoted market prices to attempt to address some of these risks (primarily with respect to steel and rubber), there can be no assurance that commodity price fluctuations will not adversely affect our results of operations and cash flows. In addition, while the use of index pricing adjustments may provide us with some protection from adverse fluctuations in commodity prices, by utilizing these instruments, we potentially forego the benefits that might result from favorable fluctuations in price.materials.

Our operations may also be disrupted by other labor issues, including absenteeism, public health events and government restrictions; major equipment failure with prolonged downtime or a complete loss of critical equipment where either no other comparable equipment exists or the remaining equipment does not have enough capacity to pick up the demand; or natural disaster-related plant closures or disruptions.disruptions caused by natural or other disasters; disruptions caused by cybersecurity attacks; or any similar disruptions at one or more of our suppliers or our customers’ suppliers if an alternative source of supply were not readily available. Additionally, similar disruptions at our customers’ facilities could result in reduced demand for our products causing us to delay or cancel production. Any significant disruption to our production could negatively affect our operations, customer relationships and financial performance.

Further, we continually update and expand our information technology systems to enable us to run our business more efficiently, including the potential incorporation of traditional and generative A.I. solutions into our information systems and processes. The increasing use and evolution of this technology creates potential risks for loss or misuse of sensitive Company data that forms part of any data set that was collected, used, stored, or transferred to run our business, and unintentional dissemination or intentional destruction of confidential information stored in our or our third party providers' systems, portable media or storage devices. All of these risks have the potential to result in significantly increased business and security costs, a damaged reputation, administrative penalties, or costs related to defending legal claims. In addition, if the content, analyses, or recommendations that A.I. programs assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations and our reputation may be adversely affected. If theseour information technology systems and infrastructure are not maintained or implemented successfully and in a timely, cost-effective, compliant and responsible manner, our operations and business could be disrupted and our ability to report accurate and timely financial results could be adversely affected.

AnOur Company’s, our suppliers’ or our customers’ and their supplier’s inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.

In connection with the award of new business, we may obligate ourselves to deliver new products that are subject to our customers’ timing, performance and quality standards. Given the number and complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs. In addition, new program launches require a significant ramp up of costs. Our sales related to these new programs generally are dependent upon the timing and success of our customers’ introduction of new vehicles. AnOur inabilityinability, and that of our suppliers and customers and our customers’ suppliers, to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition, operating results and cash flows.

We could face risks related to public health events, including epidemics and pandemics like the COVID-19 pandemic.pandemics. Preventative measures taken to contain or mitigate public health events (including, but not limited to, vaccination, social distancing policies, restrictions on travel and reduced operations and extended closures of many businesses and institutions) may materially impact our financial condition and operations results due to shutdowns of our and our customers’ and suppliers’ facilities; increased operating and production costs; disruptions and financial distress in the supply chain; disruptions in our production cycle; lost or absent members of the workforce; a decline in demand due to an economic downturn; and inability to access capital due to disruptions in the global financial markets.

Our operations strategy includes continuous improvement programs and implementation of lean manufacturing tools across all facilities to achieve cost savings and increased performance. Further, we have and may continue to initiate restructuring actions designed to improve future profitability and competitiveness. The cost savings that we anticipate from these initiatives may not be achieved on schedule or at the level we anticipate,anticipate and could be negatively impacted by lower-than-expected production volumes. If we are unable to realize these anticipated savings, our operating results and financial condition may be adversely affected.

In addition, if the Company has borrowing availability under its ABL Facility less than the greater of (i) $15.0 million and (ii) 10% of the Borrowing Base (as defined in the ABL Facility), it must be in compliance with a springing Fixed Charge Coverage Ratio maintenance covenant of 1.00:1.00. Any adverse effects on the Company’s business due to global, market and economic conditions may adversely impact the Company’s ability to satisfy such covenant. As of December 31, 2024,2025, there were no obligations outstanding under the ABL Facility, the Company’s borrowing base was $176.7$168.3 millionmillion, and the monthly fixed charge coverage ratio was at a level that provided the Company full access to the borrowing base. Net of $7.6$7.4 million of outstanding letters of credit, the Company effectively had $169.2$160.9 million available for borrowing under its ABL Facility.

Furthermore, production shutdowns or disruptions will result in working capital swings which could result in increased outflows. As a result of current ecomoniceconomic conditions and global supply chain disruptions, we may be required to raise additional capital, and our access to and cost of financing will depend on, among other things, our performance, changing global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. Such capital may not be available on favorable terms or at all.

Moreover, our ABL Facility provides the agent with considerable discretion to impose reserves, which could materially reduce the amount of borrowings that would otherwise be available to us.

Although we generally produce in the same geographic region as our products are sold, we also produce in countries that predominately sell in another currency. Further, some of our commodities are purchased in or tied to the U.S. dollarDollar; thereforetherefore, our earnings could be adversely impacted during the periods of a strengthening U.S. dollarDollar relative to other foreign currencies. While we employ financial instruments to hedge certain portions of our foreign currency exposures, our efforts to manage these risks may not be successful and may not completely insulate us from the effects of currency fluctuations.

We regularly monitor our goodwill, long-lived assets and intangible assets for impairment indicators. In conducting a quantitative goodwill impairment testing,test, we compare the fair value of our reporting units to their related net book value. If we instead perform a qualitative goodwill impairment test, we assess whether there are any events or circumstances that indicate it is more likely than not that the fair value of our reporting units is less than their related book value. In conducting our impairment analysis of long-lived and intangible assets, we compare the undiscounted cash flows expected to be generated from the long-lived or intangible assets to the related net book values if indicators of impairment are identified. Changes in economic or operating conditions impacting our estimates and assumptions could result in the impairment of our goodwill, long-lived assets or intangible assets. In the event that we determine that our goodwill, long-lived assets or intangible assets are impaired, we may be required to record a significant charge to earnings, which could adversely affect our results.

We sponsor various pension plans worldwide that are underfunded and will require cash contributions. Additionally, if the performance of the assets in our pension plans does not meet our expectations, or if other actuarial assumptions are modified, our required contributions may be higher than we expect. As of December 31, 2024,2025, our U.S. supplemental employee retirement plan (“SERP”) was underfunded by $9.8 million and our non-U.S. pension plans (which typically are pay-as-you-go plans) were underfunded by $81.1$83.7 million. If our cash flow from operations is insufficient to fund our worldwide pension liabilities, it could have an adverse effect on our financial condition and results of operations.

We design, manufacture and sell sealing systems and fluid handling systems (consisting of fuel and brake delivery systems and fluid transfer systems) for use primarily in passenger vehicles and light trucks manufactured by global OEMs. In 2024,2025, approximately 86% of our sales consisted of original equipment sold directly to OEMs for installation on new vehicles. The remaining 14% of our sales were primarily to Tier I and Tier II suppliers and non-automotive manufacturers. Accordingly, sales of our products are directly affected by the annual vehicle production of OEMs, particularly the production levels of the vehicles for which we provide specific parts. Most of our products are custom designed and engineered for a specific vehicle platform. Our sales and product development personnel frequently work directly with OEM engineering departments in the design and development of our various products.

In 2024,2025, approximately 59% of our sales were generated in North America. Because of our significant international operations, we are subject to the risks associated with doing business in other countries, such as increased trade restrictions, tariffs or taxes or the imposition of embargoes on imports, currency volatility, high interest and inflation rates, and the general political and economic risk that are associated with some of these markets.

The global automotive industry is susceptible to uncertainunpredictable economic conditions that couldcan adversely impact new vehicle demand and production. BusinessDisruptions in the supply chains for certain critical materials and components can further exacerbate these challenges, and business conditions maycan varyfluctuate significantly fromacross perioddifferent to period or region to region. In 2022, global automotive production was negatively impacted by broad supply chain challenges, labor market disruptionsregions and othertime lingering impacts of the COVID-19 pandemic.periods. In 2023, light vehicle production showed strong resilience and strong growth, supported by sustained consumer demand and OEM efforts to replenish depleted inventory levels. This resilience and growth wasoccurred despite continued uncertainty in theongoing global economy uncertainty created by continuedpersistent inflation, rising interest rates and increasedheightened geopolitical tension in key regions of the world. In 2024, light vehicle production slowed modestlymodestly, primarily due to rising inventory levels, relatively high interest ratesrates, concerns about vehicle affordability, and affordability concerns, and sustainedongoing geopolitical tensions throughoutaround the world. Global commodity markets and pricing have stabilized to a large degree in 2024 and into the beginning of 2025. In 2025, weglobal expectlight globalvehicle production willreturned slowto furthermoderate asgrowth inventorydespite levelslingering remaineconomic high, affordability concerns continuerisks and globaluncertainties economicstemming uncertaintyfrom persists.ongoing Thegeopolitical potentialconflicts forand changesshifts in U.S. trade policy, including the possible impositionimplementation of significant new tariffs on many imported goods, isautos addingamong them. This global growth was primarily driven by strong production volume in China which more than offset declines in North America and Europe. In 2026, industry forecasts anticipate a 0.4 percent decline in global vehicle production compared to economic risks and uncertainty globally, and could represent near-term challenges to the automotive industry.2025.

In North America, U.S. consumer confidence hasin improvedthe fromUnited 2023States remains subdued, with certain indices remaining near their lowest levels butin remains well below pre-pandemic historical averages. The conclusion of recent elections, slowing inflation, the Federal Reserve Board’s recent policy rate actions, andover a robustdecade. jobs market have been key drivers of improved consumer sentiment. However,Ongoing uncertainty aroundsurrounding U.S. trade policy,policy includingcontinues theto possiblecreate impositioninstability ofacross significantcapital tariffsand onconsumer importedmarkets. Persistently high interest rates, elevated prices for consumer goods, the timing and magnitude of further interest rate cuts by the Federal Reserve, and increasingrising consumer debt continueare tofurther weighweighing on overall economic activity. Despite these headwinds, lower tax rates, reduced regulation, and other incentives included in recent legislation are expected to help stimulate both commercial investment and consumer demand in 2026. Economists at the International Monetary Fund (IMF) arenow expectingproject that the economies of the United States, Canada and Mexico towill grow by 2.72.4 percent, 2.01.6 percent and 1.41.5 percent, respectively, in 2025.2026.

Our business is directly affected by the automotive vehicle production rates in North America, Europe, the Asia Pacific region and South America. These production rates can be impacted periodically by changing macro and micro-economicmacro-economic conditions, geopolitical actions, regional consumer sentiment, labor disruptions, supply chain disruptions and changing regulatory and trade requirements, among other factors.

According to estimates of S&P Global (formerly IHS Markit),Global, global light vehicle production was approximately 89.492.9 million units in 2024.2025. This reflects aan declineincrease of approximately 1.2%3.7% globally compared to 2023.2024.

In addition to the above, other factors will present opportunities for automotive suppliers whothat are positioned to meet the demands of evolving automotive markets and operating environment,environments. includingThese include advancements in autonomous and connected vehicles,vehicle governmenttechnologies, regulation,shifting regulatory requirements, and growing consumer preferences for environmentally friendly productsproducts. andRapid technology,developments such asin hybrid and electric vehicle (“EV”) architectures.architectures such as expanded global EV adoption, accelerating investment in charging infrastructure, and continued improvements in battery technology are reshaping industry expectations. EV sales continued to grow into 2025, supported by broader model availability and enhanced battery performance, while global forecasts project further expansion driven by regulatory pressure on emissions and ongoing electrification across major markets.

Our business is susceptible to inflationary pressures with respect to raw materials. Abrupt changes in the market prices or availability of certain key raw materials may result in operational and profitability challenges for the Company and the industry as a whole. Since 2020, market prices for key raw materials, such as steel, aluminum, and oil-derived commodities, experienced a period of extreme volatility, which led to significant cost increases for our business. In response, we worked with our customers to implement or expand index-based commercial agreements that have enabled us to partially recover incremental material costs incurred and significantly reduce our exposure and risk related to commodity price fluctuations going forward. Although global commodity markets and pricing largelyremained stabilizedstable in 2024,2025, we willcontinually continue workingwork with our customers and suppliers to mitigate ongoing inflationary pressures and material-related cost exposures through a combination of expanded index-based agreements and other commercial enhancements.

Goodwill. Goodwill is tested for impairment by reporting unit as of October 1 of each yearyear, andor more frequently if eventsan event occurs or circumstances indicate thatthe ancarrying value of goodwill may be impaired. Our goodwill impairment maytesting exist.is performed at the reporting unit level. We test goodwill for impairment by performing a qualitative assessment or using a quantitative test. IfWe wefirst electassess qualitative factors to determine whether it is necessary to perform a more detailed quantitative goodwill impairment test. We would perform a quantitative test if the qualitative assessment and determinedetermined it is more likely than not that a reporting unit’s carrying value is more than its fair value,value. We may also elect to bypass the qualitative assessment and proceed directly to the quantitative test isfor thenany performed.reporting Otherwise,unit. noIf furtherwe testingelect isto required. Forperform a quantitative goodwill analysis,test, fair value is based on the cash flows projected in the reporting units’ strategic plans and long-range planning forecasts, discounted at a risk-adjusted rate of return. Our long-range planning forecasts are based on our assessment of revenue growth rates generally based on industry specific data, external vehicle build assumptions published by widely used external sources, and customer market share data based on known and targeted awards over a three-year period. The projected profit margin assumptions included in the plans are based on the current cost structure and adjustments for anticipated cost reductions or increases. If different assumptions were used in these plans, the related cash flows used in measuring fair value could be different and impairment of goodwill might be recorded. For the 20242025 annual goodwill impairment test, we performed a qualitativequantitative assessment and determined that it is more likely than not that the fair values of our Sealing Systems, Fluid Handling Systems, and Industrial and Specialty Group reporting units exceeded their carrying values. See Note 9. “Goodwill and Intangible Assets” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.

Long-Lived Assets. We monitor our long-lived assets for impairment indicators on an ongoing basis. If impairment indicators exist, we analyze the undiscounted cash flows expected to be generated from the long-lived asset group compared to the related net book values. If the net book value exceeds the undiscounted cash flows, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived assets. Fair value is determined by using various valuation approaches depending on the asset type. Fair value of machinery and equipment is based upon either estimated salvage value or estimated orderly liquidation value. Fair value of leased buildings is based on a discounted cash flow approach. Fair value of owned buildings is based on a sales comparison approach or cost approach. When determining fair value, cash flows are estimated using internal budgets based on recent sales data, independent automotive production volume estimates, and customer commitments. If applicable, discount rates are used in fair value calculations where required. Changes in economic or operating conditions impacting these estimates and assumptions could result in the impairment of long-lived assets. In 2024, 2023 and 2022, we recorded impairment charges related to buildings and machinery and equipment. The 2024 impairments were related solely to idle assets and were based on internal assessments. In contrast, for the 2023 and 2022, we engaged a third-party valuation firm to determine fair values in order to calculate impairment charges. See Note 8. “Property, Plant and Equipment” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.

Pensions and Postretirement Benefits Other Than Pensions. Included in our results of operations are significant pension and postretirement benefit costs, which are measured using actuarial valuations. Inherent in these valuations are key assumptions, including discount rates, mortality rates, expected returns on plan assets and health care cost trend rates. These assumptions are determined as of the current year measurement date. We consider current market conditions, including changes in interest rates, in making these assumptions. Changes in pension and postretirement benefit costs may occur in the future due to changes in these assumptions. Experience gains and losses as well as the effects of changes in actuarial assumptions are recognized in other comprehensive income. Cumulative actuarial gains and losses in excess of 10% of the projected benefit obligations or the fair value of plan assets for a particular plan are amortized over the average future service period of the employees in that plan. Our net pension and postretirement benefit costs (income), which included a net one-time, non-cash pension settlement chargecharges of $44.6$0.1 million ($46.0 million net of tax),million, were approximately $51.8$7.3 million and $(1.40.9) million, respectively, for the year ended December 31, 2024. Note that the pension settlement charge resulted from the termination of a certain U.S. pension plan and the related accelerated recognition of accumulated actuarial losses included within AOCI in our consolidated balance sheets. See Note 12. “Pensions” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.2025.

* AsThe U.S assumptions relate only to the Company’s U.S. plansSERP arewhich frozen,is a frozen plan; therefore, the rate of compensation increase iswas not applicable.

* There were no U.S. plan assets as of December 31, 2024,2025; thereforetherefore, the expected return on plan assets iswas not applicable.

** AsThe U.S assumptions relate only to the Company’s U.S. plansSERP arewhich frozen,is a frozen plan; therefore, the rate of compensation increase iswas not applicable.

The Company’s policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements and contribute amounts deductible for United States federal income tax purposes or amounts required by local statute. The Company does not anticipate making cash contributions to its U.S. supplemental employee retirement planSERP in 2025,2026 but estimatesdoes expect to make immaterial minimum funding cash contributions of approximately $0.4 million to its non-U.S. pension plans in 2025.2026.

Sales for the year ended December 31, 20242025 decreasedincreased 3.0%,0.4%, compared to the year ended December 31, 2023.2024. The decreaseincrease in sales was driven by favorable foreign exchange, partially offset by unfavorable volume and mix, net of customer price adjustments including recoveries, the divestitures of our European technical rubber products business and a joint venture in the Asia Pacific region in the prior year, and the negative impact of foreign exchange.recoveries.

** Net of divestituressavings andfrom restructuring savings.initiatives.

Cost of products sold is primarily comprised of direct materials, labor, manufacturing overhead, freight, depreciation, and other direct operating expenses. Among these, direct materials represent the largest component, accounting for approximately 52% and 51% of total cost of products sold for each of the years ended December 31, 20242025 and December 31, 2023.2024, respectively. The change in cost of products sold was impacted by favorable manufacturing and purchasing cost savings through lean initiatives, the divestiture of our European technical rubber products businessinitiatives and a joint venture in the Asia Pacific region in the prior year, the impact of savings from ourprior year restructuring initiativeinitiatives, inpartially theoffset currentby year,unfavorable lowerforeign exchange, unfavorable volume and mix, net of recoveries, and lower material input costs, partially offset by higher inflation of labor and overhead,overhead and unfavorable foreign exchange.inflation.

Gross profit for the year ended December 31, 20242025 increased 4.2%8.1% compared to the year ended December 31, 2023.2024. As a percentage of sales, gross profit was 11.1%11.9% and 10.3%11.1% for the years ended December 31, 20242025 and December 31, 2023,2024, respectively. The change was driven by manufacturing and purchasing savings through lean initiatives, the impact of savings from ourprior year restructuring initiative in the current yearinitiatives and lowerfavorable materialforeign input costs,exchange, partially offset by unfavorable foreign exchange, higher inflation of labor and overhead, unfavorable volume and mix, net of customer price adjustments including recoveriesrecoveries, and thehigher divestiture of our European technical rubber products businesslabor and aoverhead joint venture in the Asia Pacific region in the prior year.inflation.

Selling, Administration and Engineering Expenses. Selling, administration and engineering expenses include administrative expenses as well as product engineering and design and development costs. Selling, administration and engineering expenses for the year ended December 31, 20242025 were $207.6$214.4 million, or 7.6%7.8% of sales, compared to $215.7$207.6 million, or 7.7%7.6% of sales, for the year ended December 31, 2023.2024. The decreaseincrease, in both dollar terms and as a percentage of salessales, was primarily due to lowerhigher compensation-relatedstock-based costscompensation expense driven by savingsstock fromprice ourappreciation restructuringduring initiative,the year ended December 31, 2025, partially offset by foreignsavings exchange.realized from restructuring actions and spending reductions initiated in 2024.

Gain on Sale of Buildings and Land,Businesses, Net. Gain on sale of buildings and land,businesses, net for the year ended December 31, 2024 was $3.3$2.0 million, resulting from the salenet effect of athe building and land related to onesale of our Canadian facilities.tooling business. See Note 8.4. “Property, Plant and EquipmentDivestitures” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.

PensionGain Settlementon Sale of Buildings and CurtailmentLand, Charges.Net. Non-cashGain settlementon sale of buildings and curtailmentland, charges of $44.6 millionnet for the year ended December 31, 2024 primarilywas $3.3 million, resulting from the sale of a building and land related to the terminationone of aour certainCanadian U.S. pension plan. Non-cash settlement charges of $16.0 million for the year ended December 31, 2023 primarily related to lump sum payments paid to eligible participants from plan assets as part of the approved termination of the aforementioned U.S. pension plan.facilities. See Note 12.8. “PensionsProperty, Plant and Equipment, Net” to the consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data” of this Report for additional information.

Other Expense, Net. Other expense, net for the year ended December 31, 20242025 increaseddecreased $2.2$17.0 million compared to the year ended December 31, 2023,2024. The change was primarily duedriven toby $10.3 million of income recognized in connection with certain royalty settlements during the unfavorableyear impactended ofDecember foreign31, currency2025 exchange, partially offset byand a decrease in periodicforeign benefitcurrency costlosses otherby than$5.7 servicemillion cost.year-over-year.

Income Tax (Benefit) Expense.Benefit. Income tax benefit for the year ended December 31, 20242025 was $19.2 million on losses before taxes of $23.5 million. This compared to an income tax benefit of $23.3 million on losses before taxes of $101.5 million. This compared to an income tax expense of $8.9 million on losses before taxes of $194.4 million for the year ended December 31, 2023.2024. The tax expense in 20242025 and 20232024 differed from the statutory rate primarily due to incremental valuation allowances recorded on tax losses generated in the U.S. and certain foreign jurisdictions, the mix of income between the U.S. and foreign sources, tax credits and incentives, and other nonrecurring discrete items. Additionally, the year ended December 31, 2025 included a $45.4 million benefit for valuation allowance reversals in France, Spain, and a Korean location while the year ended December 31, 2024 includesincluded a $41.5 million benefit for valuation allowance reversals in Brazil, Poland, and a Chinese location.

Our business is organized in two reportable segments: Sealing Systems and Fluid Handling Systems. All other business activities are reported in Corporate, eliminations and other. The Company uses segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determinesdetermine the resources to be allocated to the segments. We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, restructuring expense, and special items.

Sealing Systems. The sales variance due toin volume and mix,mix includingwas driven by lower customer volumes, unfavorable product mix and unfavorable customer price adjustments,adjustments. The foreign currency exchange variance was primarily driven by lowerthe customerstrengthening recoveries.of Thethe unfavorableEuro foreignrelative currencyto exchangethe impactU.S. wasdollar, drivenwhich resulted in an $18.4 million favorable impact, partially offset by a $7.7$3.9 million unfavorable impact of the Brazilian Real, $3.1a $3.0 million impact of the Chinese Renminbi, $2.1 millionunfavorable impact of the Canadian Dollar, and $0.4a $0.6 million unfavorable impact of all other currencies.

Fluid Handling Systems. The sales variance due toin volume and mix,mix includingwas driven by favorable customer price adjustments, including tariff recoveries and increased pass-through pricing associated with directed-buy components, partially offset by lower customer volumes and unfavorable product mix. The foreign currency exchange variance was primarily driven by lowerthe customerstrengthening volumes.of Thethe unfavorableEuro foreignrelative currencyto exchangethe impactU.S. wasdollar, drivenwhich resulted in a $5.2 million favorable impact, partially offset by a $3.5$3.2 million unfavorable impact of the Korean Won, $2.8 million impact of the Brazilian Real, and $1.0a $1.1 million unfavorable impact of all other currencies.

** Net of savings from restructuring savings.initiatives.

Sealing Systems. The adjusted EBITDA variance due toin volume and mix, including customer price adjustments, was primarily driven by lower customer recoveries.volumes and unfavorable product mix. The unfavorable foreign currency exchange impactvariance was primarily driven by a $9.6 million impact of the Brazilian Real, $6.6 million impact of the Polish Zloty, $4.2 million impact of the Mexican Peso, and $0.2$4.8 million unfavorable impact of allthe otherCanadian currencies.Dollar. The cost decreases were primarily driven by $42.9$43.4 million of favorable manufacturing and purchasing savings through lean initiatives,initiatives. and $18.3 million of all other operational costs primarily driven by restructuringThese savings and income from unconsolidated joint ventures,were partially offset by $14.0$12.9 million of unfavorable inflationaryinflation costsin (including salarylabor and fringes,$5.7 occupancy,million andof other costs).operational cost increases.

We continue to actively preserve cash and enhance liquidity, including proactively managing our capital expenditures. We continuously monitor and forecast our liquidity situation in light of automotive industry, customer and economic factors, and take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations under our ABL Facility, dependdepends on our future operating performance and cash flowsflows. andThese may be impacted by many factors outside of our control, including but not limited to industry production levels, the costs of raw materials, the state of the overall automotive industryindustry, andgeneral financial and economic conditions, including workglobal stoppagestrade and thetariff continuedpolicies, impactwork ofstoppages, and potential public health events,events. andConsidering otherthese factors. Based on those actions andfactors, current projections offor light vehicle production and customer demand for our products, we believe that our cash flows from operations, cash on hand, availability under our ABL Facility and receivables factoring will enable us to meet our ongoing working capital requirements, capital expenditures, debt service and other funding requirements for the foreseeable future, despite the challenges facing the industry.

Operating Activities. Net cash provided by operating activities was $76.4$64.4 million for the year ended December 31, 2024,2025, compared to net cash provided by operating activities of $117.3$76.4 million for the year ended December 31, 2023.2024. The net change was primarily due to lower net cash earnings year-over-year, changes in net working capital balances.and an increase in cash interest payments by $12.4 million year-over-year. Working capital was negatively impacted primarily by a larger increase in receivables, reflecting timing of collections from customers during the year ended December 31, 2025 compared to the year ended December 31, 2024.

Investing Activities. Net cash used in investing activities was $45.1$45.6 million for the year ended December 31, 2024,2025, compared to net cash used in investing activities of $65.0$45.1 million for the year ended December 31, 2023.2024. The net change was primarily due to lowerproceeds capitalfrom expenditures,the partially offset by net proceedssale of $15.4fixed assets of $4.3 million related to our 2023 divestitures which were received induring the year ended December 31, 2023.2024, partially offset by lower capital expenditures year-over-year, as well as a net increase in proceeds from the sale of businesses by $1.8 million year-over-year. Capital expenditures were $48.2 million for the year ended December 31, 2025 compared to $50.5 million for the year ended December 31, 2024. We expect capital expenditures in 2025 to bemaintain relatively consistent with 2024, primarily as part of initiatives to consistently lower overalldisciplined capital spending.spending Weand anticipate that we will spend approximately $45.0 to $55.0 million ontotal capital expenditures of approximately $55 million to $65 million in 2025.2026.

Financing Activities. Net cash used in financing activities totaled $9.6$4.0 million for the year ended December 31, 2024,2025, compared to net cash used in financing activities of $81.1$9.6 million for the year ended December 31, 2023.2024. The net change was primarily due to refinancinga transactionsnet that occurreddecrease in 2023.principal payments on outstanding debt by $7.5 million year-over-year and a net decrease in debt issuance costs by $1.9 million year-over-year. The prior year debt issuance costs were paid in connection with Amendment No. 4 to the Company’s ABL Facility, which was executed in May 2024. These changes were partially offset by a net increase in tax withholding amounts related to employees’ share-based payment awards by $1.1 million year-over-year.

In June 2018, our Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing us to repurchase, in the aggregate, up to $150.0 million of our outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by management and in accordance with prevailing market conditions and federal securities laws and regulations. We expect to fund any future repurchases from cash on hand and future cash flows from operations. The specific timing and amount of any future repurchase will vary based on market and business conditions, changes in tax laws and other factors. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. The 2018 Program was effective beginning November 2018. As of December 31, 2024,2025, we had approximately $98.7 million of repurchase authorization under the 2018 Program. We did not make any repurchases under the 2018 Program during the years ended December 31, 2025, 2024 or 2023.

The global automotive industry is susceptible to unpredictable economic conditions that can adversely impact new vehicle demand and production levels. These challenges may be compounded by disruptions in supply chains for certain critical materials and components, whileand business conditions can vary materially by region and over time. In 2025, global light vehicle production increased modestly despite persistent economic risks and uncertainties stemming from ongoing geopolitical conflicts, vehicle affordability pressures and shifts in U.S. trade policy, including the implementation of significant new tariffs on a broad range of imported goods, automobiles included. This growth was primarily driven by strong production volumes in China, which more than offset declines in North America and Europe.uncertainties. The industry outlook for the remainder of 2026 iscontinues increasinglyto be uncertain due to geopolitical risks, including military actions in the Middle East, rising oil prices, constraints on global trade and transportation through the Strait of Hormuz, and increased inflationary pressures and reduced consumer confidence.pressures.

In North America, consumer confidence in the United States remains subdued, with certain surveys and economic indices decliningremaining tonear their lowest levels in over a decade. Ongoing concerns regarding U.S. military actions in the Middle East and continued uncertainty surrounding U.S. trade policy have contributed to heightened volatility across capital and consumer markets. Persistently high interest rates, elevated prices for energy and consumer goods, and rising levels of consumer debt are further weighing on overall economic activity. Conversely, lower tax rates, reduced regulation, and other incentives included in recently enacted legislation are expected to support commercial investment and consumer demand once geopolitical conditions stabilizes.stabilize. Economists at the International Monetary Fund (“IMF”) project that the economies of the United States, Canada and Mexico will grow by 2.3 percent, 1.51.1 percent and 1.61.2 percent, respectively, in 2026.

In Europe, trends toward economic stabilization and expansion evident earlier in the year have been disrupted by the military actions in the Middle East. Rising oil and natural gas prices are contributing to higher inflation and lower consumer spending. Fiscal stimulus, particularly in Germany, increased defense-related spending, and continuing solid business investment are expected to provide some support to regional economic activity, partially offsetting lower consumer spending. In addition, unemployment in the region appears to be stabilizing at approximately 6.0% which is the lowest level in a decade. Amid this uncertain environment, economists at the IMF project that the Eurozone economy will grow by 1.10.9 percent in 2026.

In South America, the Brazilian central bank initiated a policy to lower interest rates during the first quarter of 2026 in an effort to stimulate economic growth. However, inflationary pressures have re-emerged as military actions in the Middle East have led to higher energy prices and increased costs for imported fertilizers critical to Brazil’s agriculture sector. With inflation concerns rising, the central bank may need to moderate its pace of rate reductions in the near term. Despite these concerns and ongoing global market uncertainty, consumer confidence in Brazil remains well above the averages observed over the past decade. As a result, economists at the IMF project that Brazil's economy will grow by 1.92.4 percent in 2026.

Light vehicle production in certain regions for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows:

(1)Production data based on S&PMobility Global, AprilJuly 2026.

Current industry forecasts project that global light vehicle production for the full year 2026 will decline by approximately 2% in 2026 compared to the full yearwith 2025, followed by modest growth in 2027. Actual production volumes, however, have varied historically and may fluctuate from forecasted levels due to geopolitical actions, catastrophic events affecting the supply of aluminum and other critical materials and components, broader supply chain disruptions, labor-related disruptions in certain regions or locations, cyberattacks or natural disasters impacting customer operations, changes in consumer demand, the regulatory environment, availability of incentives and overall industry competitiveness, among other factors. In addition, the electric vehicle segment continues to face significant challenges in achieving previously forecasted production volumes, particularly in North America.

Our business is susceptible to inflationary pressures related to raw materials. Abrupt changes in the market prices or availability of certain key raw materials may result in operational and profitability challenges for the Company and the industry as a whole. Although global commodity markets and pricing remained relatively stable in 2025, geopolitical instability in the Middle East during the first threesix months of 2026 has contributed to higher oil prices and disruptions along major global shipping routes. These conditions may result in shipment delays, extended transit times, increased fuel, freight and insurance costs, reduced carrier availability, or the need to reroute cargo, any of which could adversely affect our supply chain, production schedules, operating costs, and ability to meet customer delivery commitments. ToDuring date,the second quarter of 2026, we have not experienced a materialsignificant financial impact from the ongoing geopolitical instabilityspike in theraw Middlematerial East.costs, primarily but not exclusively related to petroleum-derived products. We continue to work closely with our customers and suppliers to mitigate ongoing inflationary pressures and material-related cost exposures through a combination of index-based pricing agreements and other commercial enhancements.

Three Months Ended MarchJune 31,30, 2026 Compared with Three Months Ended MarchJune 31,30, 2025

Sales for the three months ended MarchJune 31,30, 2026 increased 2.9%,2.2% compared to the three months ended MarchJune 31,30, 2025. The increase in sales was driven by favorable foreign exchange,exchange partiallyand offsetthe byfavorable netimpact unfavorableof volume and mix, net of customer price adjustmentsadjustments, including recoveries.

Cost of products sold is primarily comprised of direct materials, labor, manufacturing overhead, freight, depreciation and other direct operating expenses. Among these, direct materials represent the largest component, accounting for approximately 50% and 52%53% of total costscost of products sold for each of the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, respectively.2025. The change in cost of products sold was impacted by unfavorable foreign exchange, increased costs from volume and mix, net of recoveries, and increased costs from higher inflation of labor and overhead, increased tariff expense, and unfavorable material economics, partially offset by manufacturing and purchasing savings through lean initiatives and savings from prior year restructuring initiatives.

Gross profit for the three months ended MarchJune 31,30, 2026 increaseddecreased $5.2$9.3 million compared to the three months ended MarchJune 31,30, 2025. The change in gross profit was driven by increased costs due to higher inflation of labor and overhead, increased tariff expense, unfavorable material economics, and unfavorable foreign exchange, partially offset by manufacturing and purchasing savings through lean initiatives and savings from prior year restructuring initiatives, partially offset by unfavorable volume and mix, net of recoveries, and higher inflation of labor and overhead.initiatives.

Selling, Administration and Engineering Expenses. Selling, administration and engineering expenses include administrative expenses as well as product engineering and design and development costs. Selling, administration and engineering expenses for the three months ended MarchJune 31,30, 2026 were $52.5$52.6 million, or 7.6%7.3% of sales, compared to $51.2 million, or 7.7%7.3% of salessales, for the three months ended MarchJune 31,30, 2025. The increase in dollar terms was primarily due to foreign exchange.

Restructuring Charges. Restructuring charges for the three months ended MarchJune 31,30, 2026 increased $2.5$14.2 million compared to the three months ended MarchJune 31,30, 2025. The increase was primarily driven by higher restructuring costs related to employee severance and other related exit costs associated with the closure and downsizing of certain plants in ourEurope Fluidand HandlingNorth Systems segment.America.

Other (Expense) Income,Expense, Net. Other expense, netnet, for the three months ended MarchJune 31,30, 2026 wasdecreased $2.1$2.7 million compared to other income, net of $8.9 million for the three months ended MarchJune 31,30, 2025. The change was primarily driven by $10.0$0.5 million of incomeforeign currency gains recognized in connectionthe withthree certainmonths royaltyended settlementsJune 30, 2026 compared to $2.4 million of foreign currency losses recognized in the priorthree yearmonths period.ended June 30, 2025.

Income Tax Expense. Income tax expense for the three months ended MarchJune 31,30, 2026 was $4.2$5.4 million on losses before income taxes of $29.1$13.5 million compared to an income tax expense of $2.7$8.1 million on earnings before income taxes of $4.3$6.6 million for the three months ended MarchJune 31,30, 2025. The effective tax rate for the three months ended MarchJune 31,30, 2026 differed from the effective tax rate for the three months ended MarchJune 31,30, 2025 primarily due to the geographic mix of pre-tax earnings and losses, the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions due to valuation allowances,allowances and other permanent items.

Three Months Ended MarchJune 31,30, 2026 Compared with Three Months Ended MarchJune 31,30, 2025

Sealing Systems. The variance in volume and mix, including customer price adjustments, was driven by lower customer volumes and unfavorable mix. The foreign currency exchange variance was primarily driven by the strengthening of the Euro relative to the U.S. dollar, which resulted in a $13.0 million favorable impact, as well as a $2.4$3.4 million favorable impact of the Chinese Renminbi, a $2.0$2.9 million favorable impact of the Brazilian Real,Euro, and a $1.2$1.9 million favorable impact of all other currencies.

Fluid Handling Systems. The variance in volume and mix, including customer price adjustments, was driven by favorable volume and mix, improved customer recoveries, and timing ofincreased tariff recoveries. The foreign currency exchange variance was primarily driven by the strengthening of the Euro relative to the U.S. dollar, which resulted in a a $3.7 million favorable impact of the Euro, as well as a $1.0$1.4 million favorable impact of the Chinese Renminbi, a $0.9 million favorable impact of the Euro, and a $0.7$0.3 million favorableunfavorable impact of all other currencies.

Fluid HandlingSealing Systems. The variance in volume and mix, including customer price adjustments, was driven by improvedlower customer recoveries, timing of tariff recoveries,volumes and partially offset by unfavorable mix. The foreign currency exchange variance was primarily driven by a $5.3$2.5 million favorable impact of the Canadian Dollar and a $1.3 million unfavorable impact of the Mexican Peso and a $0.7 million favorable impact of all other currencies.Peso. The cost decreasesincreases were driven primarily by $10.5$8.2 million of unfavorable material economics and $4.2 million of unfavorable inflation in labor and other operational costs. These cost increases were partially offset by $8.4 million of manufacturing and purchasing savings through lean initiatives and were partially offset by $6.0$0.9 million of unfavorable inflation in labor andall other operational cost increases.savings.

As a result of the Refinancing Transactions, the Company extended the maturities of its indebtedness and reduced the amount of cash interest the Company is required to pay on such indebtedness. The Company recognized a loss on the refinancing and extinguishment of debt of $24.2 million during the threesix months ended MarchJune 31,30, 2026 related to redemption premiums associated with the prepayment of our First Lien Notes and Third Lien Notes and the write off of unamortized debt issuance costs and unamortized original issue discount on our First Lien Notes and Third Lien Notes. Additionally, the Company incurred total fees and redemption premiums of $35.3$35.4 million associated with the Refinancing Transactions, of which $28.9$35.0 million were paid during the threesix months ended MarchJune 31,30, 2026 and $6.4$0.4 million are recorded in accounts payable in the condensed consolidated balance sheets as of MarchJune 31,30, 2026 andwhich will be paid in future periods. The fees and redemption premiums paid during the threesix months ended MarchJune 31,30, 2026 are reflected as a financing outflow in the condensed consolidated statement of cash flows.

Operating Activities. Net cash used in operations was $69.2$39.0 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash used in operations of $14.9$30.4 million for the threesix months ended MarchJune 31,30, 2025. The net change was primarily due to ana increasedecrease in cash interest payments of $23.9$30.1 million year-over-year as a result of the Refinancing Transactions described above, partially offset by lower net cash earnings year-over-year driven by $10.0$10.3 million of income recognized in connection with certain royalty settlements in the prior year and changes in working capital. Working capital was negatively impacted primarily due to an increase in payments related to customer tooling programs during the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025.

Investing Activities. Net cash used in investing activities was $24.0$37.9 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash used in investing activities of $15.2$22.8 million for the threesix months ended MarchJune 31,30, 2025. The net change was primarily due to higher capital expenditures.expenditures, primarily related to customer program and launch requirements. Capital expenditures were $24.0$37.9 million for the threesix months ended MarchJune 31,30, 2026 compared to $17.5$25.3 million for the threesix months ended MarchJune 31,30, 2025. We expect to maintain disciplined capital spending and anticipate total capital expenditures of approximately $55 million to $65 million in 2026.

Financing Activities. Net cash provided by financing activities totaled $16.4$9.7 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash used in financing activities of $2.5$4.4 million for the threesix months ended MarchJune 31,30, 2025. The net change was primarily due to the net cash impact of the Refinancing Transactions described above. This net change was partially offset by a net increase in tax withholding amounts related to employees’ share-based payment awards by $1.3 million year-over-year.

In June 2018, our Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing us to repurchase, in the aggregate, up to $150.0 million of our outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by us and in accordance with prevailing market conditions and federal securities laws and regulations. We expect to fund any future repurchases from cash on hand and future cash flows from operations. The specific timing and amount of any future repurchase will vary based on market and business conditions, changes in tax laws and other factors. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. The 2018 Program became effective in November 2018. As of MarchJune 31,30, 2026, we had approximately $98.7 million of repurchase authorization remaining under the 2018 Program. We did not make any repurchases under the 2018 Program during the threesix months ended MarchJune 31,30, 2026 or 2025.

We designated Liveline Technologies, Inc. (“Liveline”) as an unrestricted subsidiary under the terms of certain of its debt agreements. Liveline remains a wholly-owned subsidiary of CSA U.S. Liveline incurred a net loss of $0.5$0.6 million and $0.4$1.1 million during the three and six months ended MarchJune 31,30, 20262026, respectively, compared to a net loss of $0.6 million and March$1.0 31,million during the three and six months ended June 30, 2025, respectively. As of MarchJune 31,30, 2026, Liveline had approximately $0.9 million of gross assets. Liveline will look to the Company for necessary funding until it is able to sustain itself through sales of its products and services.

(2)Loss on refinancing and extinguishment of debt relating to the Refinancing Transactions during the three months ended March 31, 2026.Transactions.

There have been no significant changes in our critical accounting estimates during the threesix months ended MarchJune 31,30, 2026.

This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. Our use of words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “outlook,” “guidance,” “forecast,” or future or conditional verbs, such as “will,” “should,” “could,” “would,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: volatility or decline of the Company’s stock price, or absence of stock price appreciation; impacts and disruptions related to the wars in Ukraine and the Middle East; escalating pricing pressures; our ability to achieve commercial recoveries and to offset the adverse impact of higher commodity and other costs through pricing and other negotiations with our customers; work stoppages or other labor disruptions with our employees or our customers’ employees; prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruptions in our supply base or our customers’ supply base; competitive threats and commercial risks associated with our diversification strategy; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; our ability to collect tariff recoveries from our customers; foreign currency exchange rate fluctuations; the effects of a potential U.S. government shutdown and its impact on our customers; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness and rates of interest; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; significant costs related to manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal and regulatory proceedings, claims or investigations against us; the potential impact of any future public health events on our financial condition and results of operations; the ability of our intellectual property to withstand legal challenges; cyber-attacks, data privacy concerns, other disruptions in, or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; our ability to identify, attract, develop and retain a skilled, engaged and diverse workforce; our ability to procure insurance at reasonable rates; and our dependence on our subsidiaries for cash to satisfy our obligations.