Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2009)
29 slides from Cts's investor presentation, Feb 10, 2009
Slide 1: CTS Corporation Investor Presentation February 2009
cTs CORPORATION INVESTOR PRESENTATION February 2009 °. 'e MOUNG FORWARD. .VERTIMIER ERY ONY 8 @ e
Slide 2: Safe Harbor Statement
3 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, st
Slide 3: Downturn Management Action Plan
5 Downturn Management Action Plan Restructuring actions taken in Q3 and Q4 to reduce headcount 10% and lower fixed costs. Early actions contributed to solid fourth quarter results. Various operations were consolidated to lower overhead costs. For example: Santa Clara and Orion operations combined in
Slide 4: Building Confidence: Diversification Strategies are Working
7 Building Confidence: Diversification Strategies are Working Comunications Sensor and Actuator Computer Medical Industrial Defense & Aerospace Other East 0.27 0.19 0.1 0.08 0.12 0.18 0.06 Sales by Market Q4 Run Rate Diversification helps CTS reduce risk and volatility North America Asia E Low Cost
Slide 5: Building Confidence: Diversification Strategies are Working - Customers
9 EMS Components and Sensors Blue Chip Customers Globally Diversified Low Customer Concentration No one customer > 10% in Q4 2008 Building Confidence: Diversification Strategies are Working Customer Diversification 2004 Now 2004 Now HP Detroit 3 Percent of Total Sales
Slide 6: Sensors and Actuators
11 Sensors and Actuators Double-digit sales growth from 2009-2013 Despite a decline in 2009 High technology, higher margin business Leveraging capabilities into new markets On and off highway diesel engine applications (mining, agriculture, construction, etc.) Growth Through New Technology, Customer
Slide 7: Accelerator Pedal Module Total Available Market
13 CTS currently supplies 10 major customers in North America, Europe and Asia. Total Available Market (Including Pedal Sensors) Accelerator Pedal Module $150 $223 $266 $361 $381 $330 CTS Accelerator Pedal Modules Offer Performance, Quality and Cost Advantages 2003 2004 2005 2006 2007 2008 2009 2010
Slide 8: Commercial / Diesel Vehicles Extending Sensor and Actuator Capabilities
15 Commercial / Diesel Vehicles Extending Sensor and Actuator Capabilities Creating A New Growth Engine in Commercial Markets 1st Qtr 2nd Qtr East 0.9 0.1 Total Commercial Market $750M to $1B 10% Target Market Share in Five Years Small Engine Light Vehicle Awarded production programs from new custom
Slide 9: Electronic Components
17 Electronic Components Double-digit sales growth over the next 3-5 years despite a challenging 2009 High technology, high margin business Macro Trend Driving Growth Explosive communication growth in emerging markets Developed markets driving higher data traffic - - Social networking; YouTube, Face
Slide 10: Electronic Components - Communications Infrastructure
19 Electronic Components - Communications Infrastructure OCXO RF Module Ceramic Filter WiMAX Optical Networking Cellular Repeaters Wireless Base Station Satellite Communications 2003 2004 2005 2006 2007 2008 Design Wins 23 31 37 41 45 48 Infrastructure Sales $ in Millions Major/New Customers Cisco,
Slide 11: Electronic Components - Piezo Electronics
21 Electronic Components - Piezo Electronics 2005 2006 2007 2008 2009 2010 Sales 10 13 13 18 18 23 5 Sales $ in Millions Medical Ultrasound Wide Format Inkjet Printer Head Undersea Energy Exploration Aerospace Soft and Hard Piezo Ceramic Materials New applications for emerging devices 22% CAGR 28 Ne
Slide 12: Electronics Manufacturing Solutions
23 Electronics Manufacturing Solutions Target customers with complex needs Target niche sectors - defense and aerospace, medical, industrial Provide turnkey services, design to direct ship Global capabilities Strategy Mid single-digit sales growth business despite a flat to slightly weaker 2009 Spec
Slide 13: EMS Business
25 EMS Business Computer Comm Medical Industrial Aero/Def East 0.13 0.32 0.11 0.18 0.26 Communications Industrial Medical Computer 2008 Q4 2008 Run Rate Aerospace/ Defense Complexity, design capabilities, and higher service levels Stronger customer relationships Higher barriers to entry due to certi
Slide 14: Growth Through Diversification
27 Growth Through Diversification Detroit Big 3 Other East 0.6 0.4 2004-2005 Sensors & Actuators EMS HP Other East 0.7 0.3 Current* Penetrated new global customers e.g. Toyota, Honda, Chery Expanding into diesel engines / commercial vehicles Diversified away from HP concentration Expand into defense
Slide 15: 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 16: Sales and EPS Trend
31 Sales and EPS Trend 2003 2004 2005 2006 2007 2008 Adjusted 0.24 0.48 0.61 0.71 0.71 0.77 2003 - 2008 CAGR 26% Note: Excludes restructuring / tax credits EPS (adjusted) 2003 2004 2005 2006 2007 2008 Sales 463 531.3 617.5 655.6 685.9 692 $ in Millions Sales 2003 - 2008 CAGR 8% Q4 2007 Q1 Q2 Q3 Q4 A
Slide 17: Balance Sheet Management
33 Balance Sheet Management 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Adjusted Working Capital 0.049 0.138 0.134 0.028 0.02 0.024 0.024 0.024 0.025 0.026 Capital Expenditures Average 2.5% '97 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Adjusted Working Capital 0.162 0.17 0.2
Slide 18: Net Earnings and Free Cash Flow
35 Net Earnings and Free Cash Flow 2003 2004 2005 2006 2007 2008 Net Earnings 12.6 20 20.8 24.2 25.4 29.9 Free Cash Flow 16.7 1.3 29.5 31.4 32.5 21 Strong Free Cash Flow Indicates Quality of Earnings $ in Millions Preliminary
Slide 19: Capital Structure
37 Capital Structure Strong Balance Sheet Supports Growth and Shareholder Value Initiatives Current Capital Structure Total Debt to Capitalization 2000 2001 2002 2003 2004 2005 2006 2007 2008 Cash 20.6 13.3 9.2 25.3 61 12 39 53 45 Debt 174.8 139.2 86.2 50.6 36.5 70 27 20 36 % 0.442 0.386 0.265 0.205
Slide 20: Value Proposition
39 Value Proposition Reduced headcount from proactive downturn actions have lowered CTS' break-even revenue point. Diversified business model means reduced risk and volatility. Positioned in growth markets. Leverageable capacity and operating structure. Positive cash flow. Strong balance sheet and c
Slide 21: Appendix
Appendix CORPORATION
Slide 22: Sensors and Actuators Applications
43 Sensors and Actuators Applications 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 Electronic Throttle Sensors
Slide 23: Resistor & Frequency Products
45 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 Products Applications
Slide 24: EMS Product Applications
47 EMS Product Applications Storage Infrastructure Communication Infrastructure GSM BTS Network Routers IP Infrastructure CDMA BTS Wireless LAN Arrays Medical Devices & Equipment Defense & Aerospace Pain Management Glucose Monitoring Blood Analysis Ophthalmology Heart Defibrillator Thermal Weapons S
Slide 25: Major CTS Competitors
49 Major CTS Competitors PRODUCTS Sensors and Actuators Frequency Products - Infrastructure Ceramic Filters Resistor Networks Electronics Manufacturing Services COMPETITION AB Electronics, Alps, Bosch, Delphi, Denso, Continental, CST, Hella, Mikuni, Mini-circuits, Mtron, Morion, NDK, Rakon, Sirenza
Slide 26: Target Adjusted Return on Invested Capital (ROIC)
51 Target Adjusted Return on Invested Capital (ROIC) OPERATING MARGIN AFTER-TAX (NOPAT Margin) INVESTED CAPITAL TURNOVER Overall ROIC Improvement on Track 2003 2004 2005 4% 2% 6% 8% 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0% 6.3% 7.5% Shareholder Value ROIC 12% ROIC Curve 10% 12% 4.0 EMS Components & Sensors
Slide 27: Financial Summary
53 Financial Summary Note: Data shown excludes all restructuring and related one-time charges, asset impairments, customer reimbursement, income tax adjustments and material asset gains, except adjusted EBITDA, which includes the customer reimbursement only. * Preliminary
Slide 28: Other Financial Data - Income Statement
55 Other Financial Data - Income Statement Note: Data shown excludes all restructuring and related one-time charges, asset impairments, customer reimbursement, income tax adjustments and material asset gains, except adjusted EBITDA, which includes the customer reimbursement only.
Slide 29: Other Financial Data - Balance Sheet Metrics
57 Other Financial Data - Balance Sheet Metrics * Preliminary CTS CORPORATION APPENDIX 1 CTS Corporation Reconciliation of Effective Tax Rate to Adjusted Effective Tax Rate ($ in millions) 2008 Q4 YTD Adjusted effective tax rate % Tax benefit, reversal of reserves and change in tax law -19 % Effecti