Cts Corporation · NYSE:CTS
Cts — Investor Presentation (May 2014)
29 slides from Cts's investor presentation, May 2014
Slide 1: Investor Presentation May 2014
Investor Presentation May 2014
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, any financial or other guidance, stat
Slide 3: The CTS Story
The CTS Story Evolved from a Purchased Component Acquired D&R Technology. manufacturer of finished Established plants in Products Division (CPD) of Expanded strategic products (telephones Taiwan, Mexico to Motorola, including RF Filter automotive sensor product Chicago Telephone and switchboards) to
Slide 4: Sales by Market and Geographic Regions - CTS Today
Sales by Market and Geographic Regions CTS Today Sales by Market Sales by Region Defense/ Aerospace Communications 6% 4% Industrial Medical 2% 13% Asia 34% Computer/ Other 9% Americas 53% Transportation 66% Europe 13% Global Supplier of Components & Sensors 4
Slide 5: CTS Transformation
CTS Transformation CTS in the Past CTS in the Future • Multiple businesses with diverse • Sharpened focus on performance Components and Sensors • Underutilized manufacturing • Simplified global footprint, footprint improving cost structure • High overhead • Enhanced global sales and marketing capabi
Slide 6: Strategic Focus: Simplify, Focus, Drive Profitable Growth
Strategic Focus 1 2 3 Drive Profitable Simplify Focus Growth 6
Slide 7: SIMPLIFY – Sale of EMS
1 SIMPLIFY – Sale of EMS • Sale of EMS business to Benchmark Electronics for $75 million enhances value for shareholders and all CTS stakeholders „ Simplifies business model „ Sharpens CTS’ focus on higher-margin components and sensors business „ Provides additional capital to drive further growth a
Slide 8: SIMPLIFY – Improving Cost Structure
1 SIMPLIFY – Improving Cost Structure • Grow manufacturing in best cost locations – ~50% in 2013 to >80% by 2017 • Shift SG&A spend – Increase Sales & Marketing, Optimize G&A „ Improve presence in Europe and Asia „ Increase customer intimacy „ Lean corporate office „ G&A best cost optimization • Con
Slide 9: FOCUS – Competitive Strengths
2 FOCUS – Competitive Strengths RESPONSIVE REPUTATION INNOVATION Market-Driven Highly Responsive Established Brand and Flexible to Customers’ + with Strong Reputation for + New Product Development Enabled by Individual Quality and Innovative Requirements Reliability Technologies Providing innovative
Slide 10: FOCUS – Sensors & Mechatronics Overview
2 FOCUS – Sensors & Mechatronics Overview • Sensors: For commercial & passenger ü Research, Design & vehicle markets - enhance safety, fuel Engineering economy and reduce emissions ü Custom Molding • Pedal Modules: Accelerator pedal Product modules utilizing contacting and non ü Highly Automated Cap
Slide 11: FOCUS – Sensors & Mechatronics Products
2 FOCUS – Sensors & Mechatronics Products Exhaust Gas Sensor Belt Tension Sensor Throttle Position Sensor Recirculation Sensor Turbo Sensor Products Transmission Dual Clutch Transmission Chassis Height Sensor Seat Track Position Switch Position Sensor Linear Sensor Accelerator Pedal Modules Non-Cont
Slide 12: FOCUS – Sensors Mega Trends
2 FOCUS – Sensors Mega Trends Industry Trends Implications for CTS Efficiency & Emissions • Drives electronics and sensor content • Internal Combustion Engine Efficiency • Advanced propulsion systems combines old world • Alternative propulsion systems mechanics with new world electronics • Mass redu
Slide 13: FOCUS – Packaged Sensors & Mechatronics Markets
2 FOCUS – Packaged Sensors & Mechatronics Markets $ in billions Packaged Sensors Market Target Markets Mechatronic Market Target Markets Position (CAGR 5.2%) Body Powertrain Other (CAGR (CAGR 7.1%) (CAGR 11.8%) 12.4%) Pressure (CAGR 7.0%) 2013 $18B 2013 $149B (CAGR 7.4%) (CAGR 7.9%) Temperature (CAG
Slide 14: FOCUS – Electronic Components Overview
2 FOCUS – Electronic Components Overview • Electronic Components ü Research, Design & Engineering • Piezoelectric Products ü Custom Packaging • Engineered Frequency Product ü North America and Asia • RF Filters Capabilities Categories Footprint • Switches & Variable Resistors ü ISO 13485, 9001, 1400
Slide 15: FOCUS – Electronic Components Products
2 FOCUS – Electronic Components Products Piezoelectric Components HDD Inkjet Medical Military Standard Timing Precision Timing Integrated Ruggedized Components Components Subsystems Products ClearPlex® Filters Electronic Components Ceramic RF Waveguide Timing ICs EMI/RFI Filter Filters Components Co
Slide 16: FOCUS – Electronic Components Mega Trends
2 FOCUS – Electronic Components Mega Trends Industry Trends Implications for CTS Miniaturization / Integration • Components →Modules →Integrated • Increasing Integrated Circuit market share Circuit (IC) →System on Chip (SOC) • Reduced supplier base • Less power consumption • Increasing design compet
Slide 17: FOCUS – IP&E and Integrated Circuits Markets
2 FOCUS – IP&E and Integrated Circuits Markets $ in billions IP&E Market Target Markets Integrated Circuits Market Target Markets Other (CAGR Microprocessor 5.8%) RF & Wireless Interconnect Other (CAGR (CAGR 13%) (CAGR 12%) (CAGR 5.7%) 2%) Timing (CAGR Timing (CAGR 8.5%) .9%) Power (CAGR 2013 $131B
Slide 18: Leveraging Competitive Strengths
3 DRIVE PROFITABLE GROWTH – Organic Growth Leveraging Competitive Strengths RESPONSIVE REPUTATION INNOVATION Improve Utilize New Customer CTS Brand Products Intimacy Strength • Increase Europe, Asia • Leverage reputation to • Evaluate new products and presence aggressively engage new alternate techn
Slide 19: Organic Growth – New Products
3 DRIVE PROFITABLE GROWTH – Organic Growth – New Products Sensors & Mechatronics Electronic Components • Smart sensor applications • Expanded piezo-ceramic applications • New product applications – mobility • Integrated pneumatic actuators and scooters, portable medical devices, industrial sensors (
Slide 20: Disciplined approach to acquisitions
3 DRIVE PROFITABLE GROWTH – Accelerate Through Targeted Acquisitions M&A Building Blocks Strengthen Enhance Broaden Customer Product Geographic Relationships Portfolio Reach Disciplined approach to acquisitions „ Returns in excess of cost of capital „ Accretive to earnings „ Maintain balance sheet s
Slide 21: Target Capital Deployment
3 DRIVE PROFITABLE GROWTH – Target Capital Deployment Operating Cash Flow 12-14% of Sales Return Capital to Growth Shareholders Investment Acquisitions Dividends & Buybacks 60-80% of Free ~4% of Sales 20-40% of Free Cash Flow Cash Flow Capital Structure Leverage = 1.0x - 2.5x EBITDA Disciplined capi
Slide 22: Annual Financial Performance Trend
Annual Financial Performance Trend Sales Adjusted Earnings Per Share ($ in millions) $1.02 $435 EPS $0.96 $426 $409 $0.82 $0.66 $0.67 $0.64 $305 $283 $280 $213 $0.36 2009 2010 2011 2012 2013 2014E 2009 2010 2011 2012 2013 2014E Note: Sales are from Continuing Operations Adjusted EPS is as reported 2
Slide 23: Free Cash Flow
Free Cash Flow Pre-Recession Recession-Recovery Normalized Average Average $18M $20-30M $20-25M $40 $28 $24 $22 $9 $6 2004-2008 2009 2010 2011 2012 2013 Note: Free Cash Flow defined as net cash provided by operations less capital expenditures Utilized for organic growth, acquisitions, dividend and b
Slide 24: Capital Structure
Capital Structure Total Debt to Capitalization ($M) Current Capital Structure $154 $124 $119 D&R $110 Acq. Singapore Facility Sale Equity 80% $76 $74 Valpey $75 $77 36.4% Acq. 20.2% 20.2% Bank Debt 22.0% 20% ($200M Facility) 2011 2012 2013 Q1 2014 Cash Debt Debt to Capitalization Net $(2) $44 $(49)
Slide 25: Strategic Focus: Simplify, Focus, Drive Profitable Growth
Strategic Focus 1 2 3 Drive Simplify Focus Profitable Growth • Exited EMS business • Sharpening focus on core • Investing in global sales and strengths marketing capabilities • Improving cost structure • Meeting the evolving needs • Expanding into new of customers geographies • Right-sizing global f
Slide 26: Appendix
Appendix lil Simplify, Focus and Drive Profitable Growth.
Slide 27: Financial Summary
Financial Summary ($ Millions, except percentages and adjusted EPS) Q1 2014 2013 2012 2011 2010 Net Sales $100.7 $409.5 $304.5 $279.9 $282.9 Adjusted Operating Earnings $11.9 $33.6 $13.2 $15.7 $24.3 Adjusted Operating Earnings % of Sales 11.8% 8.2% 4.3% 5.6% 8.6% Adjusted Net Earnings $6.6 $25.5 $12
Slide 28: CTS Competitors
CTS Competitors Pedals Bosch, Denso, Hella, KSR Alps, Bourns, Bosch, Continental, Delphi, Sensata, Stoneridge, TT (AB), Sensors Tyco Electronics (TE) Borg Warner, Continental, Delphi, Denso, Johnson Electric, Minebea, Mechatronics Mitsuba, Mitsubishi Electric, Valeo Frequency Products Morion, Mtron,
Slide 29: SIMPLIFY – Renewed Approach: CTS Core Values
1 SIMPLIFY – Renewed Approach CTS CORE VALUES Solutions Play to Win Responsive Simplicity Oriented Integrity – Respect – Self Confidence 29