Cts Corporation · NYSE:CTS
Cts — Investor Presentation (September 2006)
38 slides from Cts's investor presentation, September 2006
Slide 1: Investor Presentation
September 2006 Investor Presentation
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements about the Company’s earnings outlook and its plans, estimates and beliefs concerning the future, are “forward-looking statements” within the meaning of the private Securities Litigation Reform Act of 1995. These forward- looking statements include, but are not limite
Slide 3: Global Operations
Global Operations Electronic Components EMS Operations Automotive Sensors 3
Slide 4: Segments and Markets
Segments and Markets Markets Automotive 25% 25% Segment Segment 7% Communications 15% 22% Electronic Components 2% Electronics 27% and Computer Manufacturing Sensors 29% Services 1% 42% 14% 58% Industrial & 7% Medical 15% 2% Other 9% Defense & Aerospace Security Consumer Based on Last Four Quarters
Slide 5: Business Growth Targets (2005 - 2008)
Business Growth Targets (2005 - 2008) Product/Market Area Annual Sales Growth Components & Sensors: 10 - 14% - Automotive Sensors 14 - 18% - Electronic Components 4 - 8% Electronics Manufacturing Services 6 - 10% Overall Organic Growth Target 8 - 12% 5
Slide 6: Strategy: Automotive Products
Automotive Products Auto Strategy 23% (2005) Sales • Aggressively expand product base. – Content growth > unit growth. • Broaden customer base. • Leverage product/market strength into Asian market. Targeting Double-Digit Growth 6
Slide 7: Accelerator Pedal Module
Accelerator Pedal Module CTS Sales $ in Millions 98 86 Awarded 47 Platforms Target Captured Industry trend is to adopt integrated 55 65 pedals for increased control with 63 reduced costs. Actual 33 51 13 16 9 2003 2004 2005 2006 2007 2008 2009 Total Available $150 $223 $266 $305 $326 $363 $393 Marke
Slide 8: Asian Automotive Growth
Asian Automotive Growth 10 Year Projected Growth In Vehicle Sales (17M Units) E. Europe 9% China W. Europe 25% Asia Over 50% of 5% N.A. Growth 12% Rest of Rest of World Asia 15% 34% CTS Sales $ in Millions 48 56 Target Captured GR CA 43 % 33 32 39 China regulations driving Actual 24 30 local content
Slide 9: Strategy: Electronic Components
Electronic Components EC 18% Strategy Sales (2005) • Focus on high margin engineered electronic components. • Aggressively introduce new products and expand the customer base. • Leverage our global footprint and Asian manufacturing. Improving Financial Performance 9
Slide 10: Electronic Components – Markets Served
Electronic Components – Markets Served Communications Handset Communications Infrastructure Computing and Other Markets 2003 2004 2005 2006E Focused on Higher Margin Growth Markets 10
Slide 11: Electronic Components – Communications Infrastructure Design Wins
Electronic Components – Communications Infrastructure Satellite Optical Networking Communications Design Wins 136 RF OCXO Module 88 78 Wireless WiMAX Base Station Filter 2004 2005 1st Half 2006 Cellular Repeaters Telematics 11
Slide 12: Electronics Manufacturing Solutions Strategy
Electronics Manufacturing Solutions EMS 59% Sales ability (2005) al Cap Glob Strategy i Target customers with complex needs. i Offer full-service flexibility. i Leverage geographic footprint. – Global sourcing. – Local NPI ¨ global completion. i Grow organically and through acquisitions. 12
Slide 13: EMS Industry
EMS Industry CUSTOMER EMS Companies Characteristics/Needs TIER 1 g Large OEMs 4Large/Global > $2B g Low Mix; High Volume 4Optimized to Low Mix - High Volume g Very Price Sensitive TIER 2 g Medium - Large OEMs 4Medium/ Regional/Global $200M - $2B CU S g High Mix; Medium Volume 4Optimized to High Mix
Slide 14: EMS Business: Higher Manufacturing Content
EMS Business Top 5 EMS Customers 95 Low Low Volume Volume CTS // High High Mix k turn % Mix quic Markets % of Sales pe & ry 70% o t ot y M ilita Pr e & pa c ty Custome curi o s r Concen Ae r se tr Declining ation & ical tion Med n ta Higher Manufacturing Content e s com trum s stem Tele l i n s a t
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
Sales 166 R 1 0.5% 158 $ in Millions th CAG 155 155 Gr o w 2 – 2005 149 150 ng 200 St ro 142 138 132 129 122 118 116 117 113 111 108 106 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2002 2003 2004 2005 2006 New Products/Acquisition Driving Sales Growth 16
Slide 17: Adjusted EPS
Adjusted EPS $0.23 AGR 65% $0.20 $0.19 - 2005 C $0.17 $0.17 $0.16 20 03 $0.13 $0.11 $0.10 $0.09 $0.07 $0.06 $0.05 $0.02 $0.02 $0.00 ($0.07) ($0.11) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2002 2003 2004 2005 2006 Earnings Growing Faster Than Revenues 17
Slide 18: Adjusted Operating Expenses (Percent of Sales)
Adjusted Operating Expenses (Percent of Sales) 19.1% 16.9% 15.3% 13.5% 12.5% 2002 2003 2004 2005 Target Expense Leverage Contributing to Earnings Growth 18
Slide 19: Cumulative Free Cash Flow
Cumulative Free Cash Flow $ in Millions Cumulative Cumulative Cash Earnings 148.9 Free Cash Flow 122.1 73.5 FY 2006 Estimate 70.5 72.8 59.1 47.5 39.6 16.7 18.0 2003 2004 2005 1st Half 2006 2003 2004 2005 1st Half 2006 Strong Cash Earnings and Free Cash Flow 19
Slide 20: Balance Sheet Management
Balance Sheet Management 24% Controllable Working Capital* 15% Capital Expenditures 20% 20% 10% Percent of Sales Percent of Sales 16% 14% 13% 5% Target 4% 12% Normal Level 3% 8% 0% 1999 2000 2001 2002 2003 2004 2005 1999 2000 2001 2002 2003 2004 2005 Efficient EfficientUtilization Utilizationof ofCa
Slide 21: Balance Sheet Management: Debt to Capitalization
Balance Sheet Management Total Debt to Capitalization Current $250 50% 44% Capital Structure Conv. Sub. $200 40% Debt 195 $ in Millions Conv. Sr. Sub. Debt $150 30% Bank Credit 20% $100 20% 82 $50 10% Equity 21 $0 0% 2000 2001 2002 2003 2004 2005 Total Debt Cash Debt to Capitalization Leverage Lever
Slide 22: Target Adjusted Return on Invested Capital (ROIC)
Target Adjusted Return on Invested Capital (ROIC) ROIC 12% Sh 2005 ar 10% Components e Va hold & Sensors lue er 2004 OPERATING 8% MARGIN 2003 AFTER-TAX (NOPAT 6% Margin) 7.9% 4% 6.3% 4.0% 2% EMS 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 INVESTED CAPITAL TURNOVER Both Segments Have Comparable ROIC Targets 22
Slide 23: Value Proposition
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 23
Slide 24: Appendix
APPENDIX Everywhere. Every Day.
Slide 25: Business Model
Business Model Core Strengths • Application engineering Growth • Materials technology • Manufacturing execution • Low-cost production • Continuous product cost Corporate Strategies reduction •Global footprint • Seek high-growth niche markets • Focus on “design to purpose” products and services • Lev
Slide 26: Customers
Customers ® Automotive EC EMS 26
Slide 27: Automotive Product Applications
Automotive Product Applications Electronic Throttle Actuators: Sensors Manifold Tuning Secondary Runner Tumble & Swirl Valves Position Sensors: Active Manifold Throttle Diesel Air Exhaust Gas Recirculation Belt Tension Sensors Turbo Charger Fuel Level Sensing Pedal Modules: Contacting & Non-Contacti
Slide 28: EMS Product Applications
EMS Product Applications Pain Management CO2 Cabinets Ophthalmology Medical Devices & Equipment Heart Defibrillator Glucose Monitoring Blood Analysis Airport Explosives Detection Secure Phone System Defense & Aerospace Thermal Weapons Radar Systems Defense Comms Network Routers IP Infrastructure Wir
Slide 29: Electronic Components Product Applications
Electronic Components Product Applications Frequency Filters and RF Modules for Resistor & Variable Resistors, Infrastructure Piezoelectric Frequency Products Encoders & Switches Products Garage Door Opener Applications Medical Ultrasound Wireless Server Base Station WiMAX Wide Format Washing Machin
Slide 30: WiMax Equipment: Industry Capital Spend
WiMax WiMax Equipment: Industry Capital Spend 8 7 $ In Billions 6 5 AGR C 4 4% 12 3 2 1 0 WiMax allows broadband wireless access networks and equipment to talk to each other 2006 2009 Estimates per Transmedia – based on provider spending plans • CTS Electronic Components awarded design wins with thr
Slide 31: Major CTS Competitors
Major CTS Competitors PRODUCTS COMPETITION Automotive Products AB Electronics, Alps, Bosch, Delphi, Denso, Hella, Mikuni, Siemens Electronic Components Frequency Products - Infrastructure C-MAC, M/A Com, Mtron, Raltron, Pericom, Sirenza, Vectron, Z-Comm Ceramic Filters Murata, TDK, UBE Resistor Netw
Slide 32: Growing Automotive Product Content
Growing Automotive Product Content CTS Sales 8 North America and Europe 5.98 $ Content Per Vehicle 6 5.48 $4.67 $4.14 4 $3.57 R a te Gro wth 14% + 2 0 2005 2006 2007 2008 2009 z Growing customer penetration – Shifting to Tier I z New products provide more value-add – Higher unit prices 32
Slide 33: Active Manifold Actuators
Active Manifold Actuators 37 $ in Millions Awarded 5 Platforms 27 CTS Target Sales 23 Trend toward active manifolds driven by: Captured 24 24 - Lower emissions requirements. 20 14 - Better fuel economy. Actual - Improved vehicle performance 12 (horsepower/acceleration). 3 3 4 2003 2004 2005 2006 200
Slide 34: Electronic Components – Piezo Electronic Elements
Electronic Components – Piezo Electronic Elements Medical Ultrasound Wide Format Inkjet Printer Head Sales $18.0 $ in Millions GR CA % 22 $9.4 $6.7 Technology: - Superior piezo ceramic material - Photolithographic capabilities - Ultra-Thin - High dielectric 2004 2005 2009E Undersea Energy Exploratio
Slide 35: Segment Performance
Segment Performance Components & Sensors EMS 366.1 364.5 270.9 261.0 252.9 253.0 270.3 SALES 211.6 210.1 $ in Millions 186.9 177.1 139.3 2001 2002 2003 2004 2005 2006H 2001 2002 2003 2004 2005 2006H 13.1% 11.5% ADJUSTED 7.9% 5.8% SEGMENT 5.0% 5.2% 2.9% OPERATING EARNINGS 2.9% 2.8% % OF SALES -2.3% -
Slide 36: Financial Summary
Financial Summary Q2 2006 Q1 2006 2005 2004 2003 2002 2001 ($ Millions, except adjusted EPS) Net Sales $165.9 $150.5 $617.5 $531.3 $463.0 $457.8 $577.7 Adjusted Operating Earnings $10.5 $11.4 $39.1 $28.4 $18.4 $1.7 $2.2 Adjusted Operating Earnings % of Sales 6.3% 7.6% 6.3% 5.3% 4.0% 0.4% 0.4% Adjust
Slide 37: Other Financial Data – Income Statement
Other Financial Data – Income Statement $ in Millions 2006 2005 2004 2003 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Sales $165.9 $150.5 $154.6 $149.2 $158.3 $155.3 $142.5 $129.1 $137.6 $122.1 $132.0 $108.5 $116.7 Gross Margin Percentage 20.8% 21.4% 21.3% 19.4% 20.4% 18.2% 21.0% 20.4% 21.0% 20.2% 20.8%
Slide 38: Other Financial Data – Balance Sheet Metrics
Other Financial Data – Balance Sheet Metrics $ in Millions 2006 2005 2004 2003 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Sales $165.9 $150.5 $154.6 $149.2 $158.3 $155.3 $142.5 $129.1 $137.6 $122.1 $132.0 $108.5 $116.7 Accounts Receivable $104.6 $94.1 $91.3 $93.3 $89.6 $97.5 $84.1 $78.8 $82.5 $83.7 $72.