Cts Corporation · NYSE:CTS
Cts — Investor Presentation (February 2005)
39 slides from Cts's investor presentation, Feb 16, 2005
Slide 1: CTS Corporation Investor Presentation February 2005
February 2005 www.ctscorp.com Exhibit 99.1
Slide 2: Safe Harbor Statement
Safe Harbor Statemen Statements about the Company's earnings outlook and its plans, estimates and beliefs concerning the future, including statements about the anticipated benefits of the SMTEK acquisition, are “forward-looking statements” within the meaning of the private Securities Litigation Refo
Slide 3: CTS Corporation: EMS, Electronic Components, Automotive Sensors
CTS Corporation EMS Operations Global Operations Electronic Components Automotive Sensors
Slide 4: Segments and Markets
Segments Automotive Communications Mobile Computer Communications Infrastructure Other Segments and Markets Electronic Components and Sensors Electronics Manufacturing Services Markets 49% 51%* 10% 38% 7% 25% 20% 25% 7% 5% 3% 9% 15% 35% 1% *Increases to 60% with SMTEK acquisition
Slide 5: Business Growth Targets
Business Growth Targets - - Automotive Sensors - - Electronic Components Electronics Manufacturing Services 12 - 17% 2 - 5% 8 - 14% 7 - 12% Sales Growth Overall Product/Market Area $850 - $900 million in sales 8 - 9% Operating Earnings as % of Sales Gross Margins Flat Improving Flat Improving (2004
Slide 6: Automotive Products Strategy
Automotive Products Strategy Aggressively expand product base. Content growth > unit growth. Broaden customer base. Leverage product/market strength into Asian market. Growth Strategy to Double Sales in Five Years on Track
Slide 7: Belt Tension Sensor Awarded 22 Platforms
CTS' Belt Tension Sensor provides superior measurement accuracy Belt Tension Sensor Awarded 22 Platforms U.S. regulations require 100% of all new light vehicles to have enhanced occupancy sensing systems by 2006. 2003 2004 2005 2006 2007 2008 2009 CTS Target Sales 1.9 8.5 28.1 32.9 29.5 29.8 28 Capt
Slide 8: Accelerator Pedal Module Awarded Platforms
Awarded 34 Platforms Industry trend is to adopt integrated pedals for complexity and cost reduction Served Available Market (Including Pedal Sensors) Accelerator Pedal Module 2003 2004 2005 2006 2007 2008 2009 CTS Target Sales 8.9 13.4 21.6 40.2 72.5 100.8 111.5 Captured 21.5 33.2 46.9 49.2 49.2 $15
Slide 9: Electronic Components Strategy
Electronic Components Strategy Improve profitability through cost reduction. Seek revenue growth in higher margin products. Manage mix of product portfolio. Improving Financial Performance
Slide 10: Managing Mix Changes to Improve Margins
Electronic Components 2002 2004 2007 Handsets 0.44 0.27 0.05 Infrastructure 0.13 0.22 0.44 Computer/Communications 0.43 0.51 0.51 Managing Mix Changes to Improve Margins Computing Infrastructure Handsets ? ?
Slide 11: Electronics Components - Infrastructure Growth
Electronics Components - Infrastructure Growth 2002 2003 2004 2005 Target 15.8 18.5 23.7 37.6 2005 New Design Wins 7 New Module Design Wins Drive $7 Million Incremental Revenue Growth. New Module Products Winning in the Market Solid Growth in Flat Market 28% Growth 13% Growth 59% Growth Growing Shar
Slide 12: ClearONE Terminators Design Wins
Introduction of Resistor/Capacitor devices. In production for over 55 different platforms. Production pending on 70 more. 150 Design Wins ClearONE(tm) Terminators 2003 2004 2005 2006 2007 2008 ClearOne 4.4 7.9 8.9 12 14 15 $ in Millions CTS Target Sales Integrated termination and filtering offers pe
Slide 13: Electronics Manufacturing Solutions Global Capability
Electronics Manufacturing Solutions Global Capability Target high mix/low to medium volume customers. Offer full-service flexibility. Leverage geographic footprint. Global sourcing. Local NPI ? global completion. Grow organically and through acquisitions. Strategy Industry-leading Turns and Cash Cyc
Slide 14: CTS EMS Growth
CTS EMS Growth 2003 2004 EMS Industry 0.08 0.12 CTS 0.12 0.29 Percent of Revenue Growth 2005 New Customers 42.4 $ in millions Target Sales From New Customers 16 new customers in last 12 months Global service model driving growth
Slide 15: Acquisition of SMTEK
Acquisition of SMTEK EMS Company offering full turnkey solutions. Focused on customers with high-mix, complex product needs. Primary markets are medical, industrial, security, telecom, and aerospace and defense. Over 25 major customers. Top ten provide 73% of revenue. Closed January 31, 2005. Total
Slide 16: SMTEK Facilities
SMTEK Facilities Bangkok 42K sq ft Santa Clara 45K sq ft Moorpark 115K sq ft Marlborough 70K sq ft Over 270,000 Sq. Ft. of Manufacturing Space
Slide 17: SMTEK Financials
SMTEK Financials Sales EBITDA Q3 04 102 5.8 Operating Margin % Q3 04 0.039 4 Quarters Ended Q3 2004 $ in Millions $120 Million Run Rate Sales
Slide 18: Acquisition Strategy: High-Mix EMS Provider
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 certifications Bac
Slide 19: Acquisition Strategy: Expansion into New Markets
Acquisition Strategy Accelerate expansion into new markets. Communications Industrial Other Computing East 24 2 2 65 Computing Communications Industrial & Security Other CTS Aero & Def Communications Indust & security Other Computing Medical Consumer East 9 14 38 5 3 24 7 Industrial & Security Other
Slide 20: Combined EMS Markets
Combined EMS Markets Med Comm Ind & Sec Aero & Def Other Computing East 6 27 11 2 5 49 Computing 49% Communications 27% Medical 6% Industrial and Security 11% Aerospace and Defense 2% Other 5% Combined sales mix based on estimated 2004 sales.
Slide 21: Acquisition Strategy: West Coast Presence
Acquisition Strategy Develop strong presence in West Coast market Significant market on West Coast. SMTEK brings strong West Coast operations. CTS has good market coverage on East Coast.
Slide 22: Shareholder Value
Shareholder Value Accretive $0.04 to $0.06 in first year Stronger top line sales growth Increased operational efficiencies Reduced market and customer concentration
Slide 23: 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 24: New Products Driving Quarterly Sales Growth
Sales 2002 2003 2004 New Products Driving Year-Over-Year Quarterly Sales Growth Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Sales 144 131 126 113 118 111 116 106 117 108 132 122 138 129 142 $ in Millions + 15% Year-Over-Year Growth
Slide 25: Adjusted EPS Improvement
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 -5.7 -0.11 -0.07 0 0.02 0.02 0.06 0.05 0.11 0.07 0.12 0.11 0.18 Adjusted EPS 2002 2003 Improvement Driven by Revenue Growth, Product Mix and Cost Reduction 2004 Note: 2004 GAAP EPS - Q2 $0.18, Q3 $0.10, Q4 $0.17
Slide 26: Adjusted Operating Expenses (Percent of Sales)
Adjusted Operating Expenses (Percent of Sales) 2001 2002 2003 Q1 Q2 Q3 Q4 2004 OP Ex. As % of Sales 0.207 0.191 0.169 0.161 0.155 0.159 0.142 0.155 Continue to Improve Operating Leverage ?360 Basis Point Improvement Over Last 3 Years Target Range 13% 14%
Slide 27: Target Return on Assets
Target Return on Assets 5% 13% 0.9 1.3 1.5 2.5 EMS Components & Sensors Target Range OPERATING MARGIN 8% 9% ASSET TURNS Target Range Target Range EMS: 50% of Sales EMS: 60% of Sales 12% ROA Curve
Slide 28: Balance Sheet Management: Working Capital and Capex
Balance Sheet Management 1999 2000 2001 2002 2003 2004 Adjusted Working Capital 0.049 0.138 0.134 0.028 0.02 0.024 Capital Expenditures Target Range 5% 3% Controllable Working Capital and Capital Expenditures At or Near Target Range '97 '98 '99 '00 '01 '02 '03 '04 Adjusted Working Capital 0.162 0.17
Slide 29: Balance Sheet Management: Cash and Leverage
Balance Sheet Management Strong Cash Position Leverage Ratio Within Target Range of 20% - 30% Majority of Bank Revolving Facility ($75 Million) Available Low Fixed Coupon and Balanced Maturities Conv. Sr. Sub. Debt Conv. Sub. Debt Equity Bank Credit Adjusted Working Capital 0.15 0.06 0.76 0.03 Capit
Slide 30: Value Proposition
Value Proposition Positioned in high-growth markets. Positive cash flow to fund growth. Leverageable capacity and operating structure allows EPS growth > sales growth. Strong balance sheet and conservative capital structure reduces risk. Positioned to Grow Profitably Growth Strategies are Working
Slide 31: Appendix
APPENDIX crs.
Slide 32: Business Model
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 Materials technology Manu
Slide 33: New Products Driving Growth
New Products Driving Growth 2002 2003 2004 2005 2006 Q3 Q4 Q5 Actual 5.2 20.2 0 0 Forecast 35 69 120 Forecast Actual Belt Tension Sensors Integrated Accelerator Pedals Manifold Actuators Small Engine Throttle Position Sensors Turbocharger Sensors Frequency Modules ClearONE(tm) Terminators Pointing S
Slide 34: Growing Automotive Product Content
Growing Automotive Product Content 2004 2005 2006 2007 North America & Europe 3.5 3.98 4.63 5.25 CTS Sales North America and Europe 14%+ Growth Rate Growing customer penetration - Shifting to Tier I New products provide more value-add - Higher unit prices
Slide 35: Automotive Product Applications
Automotive Product Applications
Slide 36: Major CTS Competitors
Major CTS Competitors PRODUCTS Automotive Sensors Frequency Products - Infrastructure Ceramic Duplexer Filters Resistor Networks Electronics Manufacturing Services COMPETITION Alps, Denso, Bosch, Hella C-MAC, M/A Com, Raltron, Pericom, Vectron, Z-Comm, Murata, TDK, UBE BI Tech, Bourns, KOA, Vishay C
Slide 37: Financial Summary
nancial Summary 2004 2003 2002-2004 2000 (Millions, except adjusted EPS) Net Sales $531.3 $463.0 $4578 «$577.7 ~— $866.5 Adjusted Operating Earnings $28.4 $18.4 $1.7 $2.2 $128.6 Adjusted Operating Earnings % of Sales 53% 4.0% 0.4% 0.4% 14.8% Adjusted Net Earnings / (Loss) $178 $8.4 65.5) 67.3) $83.8
Slide 38: Other Financial Data - Income Statement
Other Financial Data - Income Statement
Slide 39: Other Financial Data - Balance Sheet Metrics
Other Financial Data - Balance Sheet Metrics CTS Corporation Appendix 1 CTS Corporation Reconciliation of Earnings Per Share to Adjusted Earnings Per Share 2004 2003 2002 Full Year Q4 Q3 Q2 Q3 Q4 Q3 Q2 Q1 2004 2003 2002 2001 Earnings per share $ 0.17 $ 0.10 $ 0.18 (1) $ 0.17 $ 0.02 $ (0.41 ) $ (0.08