Slide 1: December 2007 Investor Presentation
December 2007 Investor Presentation www.ctscorp.com
Slide 2: Safe Harbor Statement
2 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, or statements that refle
Slide 3: Automotive, Electronic Components, EMS Operations, Global Operations
3 Automotive Electronic Components EMS Operations Global Operations
Slide 4: Automotive, EC, EMS and Major Customers
4 ® ® Automotive EC EMS Major Customers
Slide 5: Sales by Market and Segments
5 Based on sales for the last four quarters through September 2007 Total CTS EMS 59% Components & Sensors 41% Segments Automotive 27% Communications 5% Other 9% Communications 15% Computer 19% Industrial/ Medical 17% Defense/ Aerospace 8% Sales By Market
Slide 6: Diversified Customer and Geographic Base
6 Based on origin of sales Regions Customers Top 2 Low Cost Manufacturing 42% Diversified Customer and Geographic Base Increasing Manufacturing in Low Cost Regions Sales Diversification
Slide 7: Overall Growth Target: 7% - 12%
7 Overall Growth Target: 7% - 12% – Automotive • Increasing penetration of Asian customers (eg. Toyota, Honda, Chery) • New products and product extensions being introduced (eg. Smart Actuators, and Turbocharger sensors) • Tighter emissions regulations will drive growth – For light vehicles, adjacen
Slide 8: Realignment of Operations and Workforce Reductions
8 – 103 positions eliminated – Broad-based throughout CTS, mostly non-U.S. – Combined manufacturing support functions at locations that serve more than one business – Transferred product lines to better serve key customers and leverage capacity Realignment of Operations and Workforce Reductions • Wo
Slide 9: Automotive Products Strategy
9 Strategy Aggressively expand product base. Content growth > unit growth. Broaden customer base. Leverage product/market strength into Asian market. Penetrate adjacent / commercial markets. Targeting Double-Digit Growth Over 2008-2010 Automotive Products • – • • •
Slide 10: Expanding Automotive Business Into Adjacent Markets
10 Leveraging Capabilities Into New Market Segments To Drive Profitable Growth Expanding Automotive Business Into Adjacent Markets • Early Success in Serving Adjacent Markets: SETPS for Motorcycles • New Opportunities in Larger Commercial Applications: Smart Actuators for Diesel Engines in Trucks, A
Slide 11: Accelerator Pedal Modules
11 • CTS currently supplies 10 major customers in North America, Europe and Asia. Total Available Market (Including Pedal Sensors) $150 $223 $266 $361 $381 $330 CTS Accelerator Pedal Modules Offer Performance, Quality and Cost Advantages CTS Sales $ in Millions $400 Actual $408 $414 Accelerator Peda
Slide 12: Asian Automotive Growth
12 CTS Sales $ in Millions Actual 10 Year Projected Growth In Vehicle Sales (17M Units) Asian Automotive Growth Asia Over 50% of Growth China regulations driving local content CTS Operations in Taiwan and China New Zhongshan facility fully operational
Slide 13: Leveraging Growth Opportunities: Electronic Components
13 Strategy Focus on higher margin engineered components. Launch innovative and differentiating new products. Expand into new customers and applications. Leverage our global footprint and Asian manufacturing. Acquisitions to expand technology and product range (eg. Alpha). • • • • • Leveraging Growt
Slide 14: Electronic Components - Diversified Product/Market Portfolio
14 Frequency Components/Modules PRODUCTS Communications (Primarily Infrastructure Applications) MARKETS Based on 2006 Sales Ceramic Filters Resistor Diversified Product/Market Portfolio PZT Switches Consumer Industrial/Other (incl. Hydrophones/Printers) Computer Medical Defense/Aerospace Electronic
Slide 15: Electronic Components - Communications Infrastructure
15 WiMAX Optical Networking Cellular Repeaters Wireless Base Station Satellite Communications Infrastructure Sales $ Millions Major/New Customers Alcatel - Lucent, Cisco, Huawei 3-Comm, Motorola, Nokia - Siemens, Powerwave OCXO RF Module Filter Electronic Components - Communications Infrastructure
Slide 16: Electronic Components - Piezo Electronic Elements
16 Sales $ in Millions Medical Ultrasound Wide Format Inkjet Printer Head Undersea Energy Exploration Aerospace Soft and Hard Piezo Ceramic Material • Newly acquired “hard” piezo technology to complement existing “soft” piezo capabilities • Potential opportunities in actuator technology due to broad
Slide 17: Electronics Manufacturing Solutions Strategy
17 i Target customers with complex needs. i Target niche sectors - defense, aerospace, medical industrial. i Provide turnkey services, design to direct ship. i Leverage geographic footprint – Local NPI and global volume assembly – Global sourcing Strategy Electronics Manufacturing Solutions
Slide 18: EMS Customer Characteristics and Needs
18 CUSTOMER Characteristics/Needs EMS Companies EMS Industry TIER 4 Medium/ Regional/Global $200M - $2B 4 Optimized to High Mix - Medium Volume g Medium - Large OEMs g High Mix; Medium Volume g Special Needs
Slide 19: Improved Customer/Market Mix
19 Computer First Nine Months 2007 • Complexity, design capabilities, and higher service levels • Stronger customer relationships • Higher barriers to entry due to certifications, etc. • Higher margins • Averaged five new customers per quarter Improved Customer/Market Mix Computer Communications Oth
Slide 20: Financial Summary
Financial Summary Definitions and reconciliation of non-GAAP financial terms are included in the Appendix of this presentation and on CTS’ Web site at www.ctscorp.com
Slide 21: Sales: New Products/Acquisition Driving Growth
21 $ in Millions First Nine Months New Products/Acquisition Driving Sales Growth Sales
Slide 22: Earnings Growing Faster Than Revenues
22 Note: Excludes restructuring Consensus includes Sidoti, Bear Stearns and Goldman Sachs Earnings Growing Faster Than Revenues EPS (adjusted)
Slide 23: Adjusted Return on Invested Capital (ROIC)
23 OPERATING MARGIN AFTER-TAX (NOPAT Margin) INVESTED CAPITAL TURNOVER 2003 2004 2005 4% 2% 6% 8% 0.5 1.0 1.5 2.0 2.5 3.0 3.5 ROIC 10% 12% 4.0 2006 Target Adjusted Return on Invested Capital (ROIC) Overall ROIC Improvement on Track 4.0% EMS Components & Sensors 7.9%
Slide 24: Balance Sheet Management
24 Capital Expenditures Controllable Working Capital* * Controllable Working Capital Defined as Accounts Receivable + Inventories - Accounts Payable. Normal Level 3% Target 13% Efficient Utilization of Capital 4% Balance Sheet Management
Slide 25: Net Earnings and Free Cash Flow
25 $ in Millions Strong Free Cash Flow Indicates Quality of Earnings Net Earnings and Free Cash Flow
Slide 26: Capital Structure
26 Current Capital Structure Total Debt to Capitalization 195 Total Debt Cash Debt to Capitalization 66 Equity Strong Balance Sheet Supports Growth and Shareholder Value Initiatives Capital Structure
Slide 27: Value Proposition
27 • Positioned in high-growth markets. • Positive cash flow. • Leverageable capacity and operating structure. • Strong balance sheet and conservative capital structure. • Acquisitions and buybacks Expect EPS Growth > Sales Growth Value Proposition
Slide 28: CTS Corporation
CTs. CORPORATION avaryuhare, exer dey.
Slide 29: Automotive Product Applications
29 Position Sensors: Throttle Valve Exhaust Gas Re-circulating Accelerator Pedal Modules: Pedal Position Sensors Fuel Level Sensing Seat Belt Tension Sensors Electric Actuators: Active Manifolds Turbochargers Diesel Systems Automotive Product Applications
Slide 30: EMS Product Applications
30 Enterprise Virtual Array Systems Storage Infrastructure Communication Infrastructure GSM BTS Network Routers 3G Apps IP Infrastructure CDMA BTS Wireless LAN Arrays Modular Storage Arrays RAID Cards EMS Product Applications Medical Devices & Equipment Defense & Aerospace Pain Management Glucose Mo
Slide 31: Electronic Components Product Applications
31 Resistor & Frequency Products Frequency Filters and RF Modules for Infrastructure Variable Resistors, Encoders & Switches Router Storage Test System Game Controller Server Instrument Piezoelectric Medical Ultrasound Wide Format Inkjet Printer Head Undersea Energy Exploration WiMAX Wireless Base S
Slide 32: Major CTS Competitors
32 Electronic Components PRODUCTS Automotive Products Frequency Products - Infrastructure Ceramic Filters Resistor Networks Electronics Manufacturing Services COMPETITION AB Electronics, Alps, Bosch, Delphi, Denso, Hella, Mikuni, SiemensVDO C-MAC, M/A Com, Mtron, Raltron, Pericom, Sirenza, Vectron,
Slide 33: Financial Summary
33 Note: Data shown excludes all restructuring and related one-time charges, asset impairments, customer reimbursement, income tax adjustment and material asset gains, except adjusted EBITDA, which includes the customer reimbursement only. Financial Summary
Slide 34: Other Financial Data - Income Statement
34 Note: Data shown excludes restructuring costs, income tax adjustments related to repatriation and material asset gains. Other Financial Data - Income Statement
Slide 35: Reconciliation of Diluted EPS to Adjusted Diluted EPS
35 Other Financial Data - Balance Sheet Metrics CTS Corporation Appendix CTS Corporation Reconciliation of Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share 2006 2005 Full Year Q3 Q2 Q1 Q4 Q2 2005 2004 2003 2002 Earnings per share $ 0.16 $ 0.14 $ 0.13 $ 0.19 $ 0.10 $ 0.53 $ 0.53 $ 0.