Cts Corporation · NYSE:CTS
Cts — Investor Presentation (November 2005)
36 slides from Cts's investor presentation, Nov 10, 2005
Slide 1: CTS Corporation – Everywhere. Everyday.
CTS Ó Everywhere. Everyday. CTS Ó CORPORATION www.ctscorp.com November 2005
Slide 2: Forward-looking statements
Statements about the Company's eamings outlook and its plans, estimates and beliefs conceming the future, are “forwercHooking statements” within the meaning of the private Securities Litigation Reform Act of 1995. These staternents are based on management's expectations, certain assumptions and curr
Slide 3: CTS Corporation
3 CTS Ó CTS Corporation EMS Operations Electronic Components Automotive Sensors
Slide 4: Segments and Markets
4 CTS Ó Segments and Markets Segments Automotive Communications Other Computer Electronic Components and Sensors Electronics Manufacturing Services Markets 40% 60% 7% 31% 23% 31% 23% 14% 1% 1% 30% 7% 17% Industrial Consumer Military & Aerospace Security Medical 8% 6% 1%
Slide 5: Business Growth Targets
5 CTS Ó - Automotive Sensors - Electronic Components Electronics Manufacturing Services 12 - 17% 2 - 5% 8 - 14% 7 - 12% Overall Components & Sensors: Business Growth Targets Annual Sales Growth Product/Market Area (2004 - 2008)
Slide 6: Automotive Products Strategy
6 CTS Ó Aggressively expand product base. Content growth > unit growth. Broaden customer base. Leverage product/market strength into Asian market. Automotive Products Strategy • – • • Targeting Double-Digit Growth
Slide 7: Integrated pedals industry trend and accelerator pedal modules
7 CTS Ó Industry trend is to adopt integrated pedals for complexity and cost reduction Total Available Market (Including Pedal Sensors) $150 $223 $266 $326 $363 $305 $ in Millions $393 Actual Accelerator Pedal Module Awarded 42 Platforms CTS Accelerator Pedal Modules Offer Performance, Quality and C
Slide 8: Asian Automotive Growth
8 CTS Ó CTS Target Sales $ in Millions Actual Operations in Taiwan and China China regulations driving local content Leveraging existing product base 10 Year Projected Growth In Vehicle Sales (17M Units) Asian Automotive Growth Asia Over 50% of Growth i i i
Slide 9: Electronic Components Strategy
9 CTS Ó Focus on high margin engineered electronic components. Leverage our global footprint and Asian manufacturing. Aggressively introduce new products and expand the customer base. Electronic Components Strategy • • • Improving Financial Performance
Slide 10: Electronic Components – Markets Served
10 CTS Ó Computing and Other Markets Electronic Components – Markets Served Focused on Higher Margin Growth Markets Communications Handset Communications Infrastructure
Slide 11: Electronic Components – Products/Applications
11 CTS Ó WiMAX Fiber-to-the-premise Telematics Cellular Repeaters Wireless Base Station Satellite Communications Electronic Components – Products/Applications OCXO RF Module Filter Design Wins Design Wins Design Wins In design phase with 7 OEMs Design Wins Design Wins
Slide 12: Electronics Manufacturing Solutions Strategy
12 CTS Ó Target customers with complex needs. Offer full-service flexibility. Leverage geographic footprint. Global sourcing. Local NPI u global completion. Grow organically and through acquisitions. Electronics Manufacturing Solutions i i i – – i Strategy Industry-leading Turns and Cash Cycle
Slide 13: Acquisition Strategy
13 CTS Ó Acquisition Strategy Strengthen CTS as a provider of high-mix EMS services CTS’ Strength In SMTEK’s Strength In Brings An Expanded Set of Complementary Capabilities to Customers. § PCBA design for manufacture and test § Complex PCBA operations § Flexible test capability § Market-specific ce
Slide 14: Acquisition Strategy: market positioning before and after
14 CTS Ó Communications Other Communications Medical Industrial & Security Defense & Aerospace Other Computing Computing Acquisition Strategy CTS Before Positions CTS well in multiple growth markets Based on Q3 Sales $ CTS After Accelerate expansion into new markets
Slide 15: Shareholder Value
15 CTS Ó Shareholder Value Stronger top line sales growth Increased operational efficiencies Reduced market and customer concentration Accretive in first year
Slide 16: 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 17: Sales: New Products/Acquisition Driving Growth
17 CTS Ó $ in Millions 2005 2004 2003 2002 Sales New Products/Acquisition Driving Sales Growth
Slide 18: Adjusted EPS: Earnings Growing Faster Than Revenues
18 CTS Ó 2002 2003 2004 2005 Adjusted EPS Earnings Growing Faster Than Revenues
Slide 19: Adjusted Operating Expenses (Percent of Sales)
19 CTS Ó Adjusted Operating Expenses (Percent of Sales) Expense Leverage Contributing to Earnings Growth 12% 12.5% Target
Slide 20: Balance Sheet Management
20 CTS Ó Capital Expenditures 5% 3% Controllable Working Capital* 13% 10% * Controllable Working Capital Defined as Accounts Receivable + Inventories - Accounts Payable. Balance Sheet Management Normal Range Target Range Efficient Utilization of Capital
Slide 21: Current Capital Structure
21 CTS Ó Current Capital Structure Total Debt to Capitalization 195 98 Total Debt Cash Debt to Capitalization Balance Sheet Management Leverage Ratio Within Target Range of 20% - 30% Balanced Maturities
Slide 22: Free Cash Flow
22 CTS Ó $ in Millions Free cash flow is defined as the sum of net cash provided by operations and cash used for capital expenditures Free Cash Flow Cash Flow Funds Operations and Growth
Slide 23: Value Proposition
23 CTS Ó Value Proposition Positioned in high-growth markets. Positive cash flow to fund growth. Leverageable capacity and operating structure. Strong balance sheet and conservative capital structure. Growth Strategies are Working Expect EPS Growth > Sales Growth • • • •
Slide 24: Appendix
24 CTS Ó APPENDIX
Slide 25: Business Model
25 CTS Ó Business Model Profitability Growth Corporate Strategies • Seek high-growth niche markets • Focus on “design to purpose” products and services • Leverage technology to create differentiated products • Grow through product and market extensions Core Strengths • Application engineering • Mate
Slide 26: SMTEK Facilities
26 CTS Ó Bangkok Santa Clara Moorpark SMTEK Facilities 42K sq ft 45K sq ft 115K sq ft Over 200,000 Sq. Ft. of Manufacturing Space
Slide 27: Acquisition Strategy: West Coast presence
27 CTS Ó Acquisition Strategy Develop strong presence in West Coast market SMTEK brings strong West Coast operations. CTS has good market coverage on East Coast.
Slide 28: Market Differentiation
28 CTS Ó More Complex Less Complex Market Differentiation High Volume / Low Mix Low Volume / High Mix CTS Markets
Slide 29: Growing Automotive Product Content
29 CTS Ó CTS Sales North America and Europe l Growing customer penetration – Shifting to Tier I l New products provide more value-add – Higher unit prices Growing Automotive Product Content
Slide 30: Automotive Product Applications
30 CTS Ó Position Sensors: (Contacting & Non-Contacting) Throttle Exhaust Gas Recirculating Active Manifold Monitoring Actuators: Manifold Tuning Secondary Runner Tumble & Swirl Valves Pedal Modules: (Contacting & Non-Contacting) Pedal Position Sensors Memory Seat Position Sensors Fuel Level Sensing
Slide 31: Active Manifold Actuators
31 CTS Ó Trend toward active manifolds driven by: Lower emissions requirements. Better fuel economy. Improved vehicle performance (engine torque). $65 $71 $86 $131 $194 $266 Total Available Market $335 $ in Millions Active Manifold Actuators Awarded 5 Platforms - - - CTS’ innovative solution provide
Slide 32: Major CTS Competitors
32 CTS Ó Major CTS Competitors PRODUCTS Automotive Products Frequency Products - Infrastructure Ceramic Duplexer Filters Resistor Networks Electronics Manufacturing Services COMPETITION Alps, Delphi, Denso, Bosch, Hella C-MAC, Raltron, Pericom, Vectron, Z-Comm, Murata, TDK, UBE BI Tech, Bourns, KOA,
Slide 33: Financial Summary
33 CTS Ó 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 CTS Ó Note: Data shown excludes income tax adjustment and material asset gains. Other Financial Data - Income Statement
Slide 35: Other Financial Data - Balance Sheet Metrics
35 CTS Ó Other Financial Data - Balance Sheet Metrics
Slide 36: Return on Assets targets and EPS reconciliation
36 CTS Ó Target Return on Assets 5.0% 12.0% 1.0 1.5 1.6 2.5 OPERATING MARGIN 7.5% 8.0% ASSET TURNS EMS: 55% of Sales EMS: 65% of Sales 2003 2004 2005 EMS Components & Sensors Target Range Target Range Both Segments Have Comparable ROA Targets CTS CTS CTS CTS Corporation Regulation G CTS Corporation