Cts Corporation · NYSE:CTS
Cts — Investor Presentation (November 2008)
36 slides from Cts's investor presentation, Nov 19, 2008
Slide 1: CTS Corporation Investor Presentation
CTs CORPORATION INVESTOR PRESENTATION November 2008 e. annie °, MOMNG FORWARD. EVERTWEE. EVERYDAY S@ e
Slide 2: Safe Harbor Statement
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, stat
Slide 3: Segment and Market Mix
Segment and Market Mix 2008 Nine Months Revenue $529 Million 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr East 0.56 0.44 West North Components and Sensors 1st Qtr 2nd Qtr 3rd Qtr East 0.56 0.27 0.17 West North EMS Sensors & Actuators Electronic Components Focused on medical, industrial, defense and aerospace Des
Slide 4: Key Customers
Key Customers EMS Components and Sensors All Other B East 0.93 0.07 Big 3 Auto Direct/Indirect Blue Chip Customers Globally Diversified Low Customer Concentration No one customer > 10% Total CTS Sales
Slide 5: Global Footprint
Global Footprint Components and Sensors EMS North America Asia E Low Cost Europe East 0.45 0.05 0.42 0.06 0.07 Sales By Region 2008 Outlook Low Cost Manufacturing 53%
Slide 6: Reposition Portfolio to Higher Margin Businesses
Reposition Portfolio to Higher Margin Businesses 2005-2007 Nine Months 2008 2012 EMS 0.59 0.56 0.4 Components & Sensors 0.41 0.44 0.6 Components and Sensors Sensors and Actuators Electronic Components Higher margin businesses Faster growth, organic and acquisition Higher margin new products EMS Lowe
Slide 7: Growth Through Diversification
Growth Through Diversification Comunications Sensor and Actuator Computer Industrial/Medical Defense & Aerospace Other East 0.22 0.27 0.11 0.13 0.06 0.11 0.1 Current* 2004 Other Sensor and Actuator Computer Communications East 0.12 0.25 0.35 0.28 HP Big 3 HP Big 3 *Q3 Run Rate A Diversification Driv
Slide 8: Growth Drivers 2009-2012
Growth Drivers 2009-2012 New products and design wins in Components and Sensors New customer and market penetration worldwide --- strong in Asia Faster growth of target markets --- Defense and Aerospace, Medical and Industrial Overall Growth Target: 7% - 10%
Slide 9: Sensors and Actuators
Sensors and Actuators Double-digit sales growth from 2009-2013 High technology, higher margin business Leveraging capabilities into new markets Growth Through New Technology, Customers and Penetration of New Markets Sales Sensors & Actuators Auto 0.73 0.27 Sensors/ Actuators Macro Trend Driving Grow
Slide 10: Accelerator Pedal Module Total Available Market
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 20
Slide 11: Commercial / Diesel Vehicles
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 $1B 10% Target $100M In Five Years Received first major award from a global diesel engine manufacturer Small Engine Light Ve
Slide 12: Electronic Components
Electronic Components Double-digit sales growth (organic and acquisitions) High technology, high margin business Macro Trend Driving Growth Explosive communication growth in emerging markets Developed markets driving higher data traffic - - Social networking; YouTube, Facebook Demographics, defense/
Slide 13: Electronic Components - Communications Infrastructure
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 49 Infrastructure Sales $ in Millions Major/New Customers Cisco, Hua
Slide 14: Electronic Components - Piezo Electronics
Electronic Components - Piezo Electronics 2005 2006 2007 2008 2009 2010 Sales 10 13 13 16 18 21 Alpha 3 4 5 10 Sales $ in Millions Medical Ultrasound Wide Format Inkjet Printer Head Undersea Energy Exploration Aerospace Soft and Hard Piezo Ceramic Materials New Piezo Capabilities Are Expected to Spu
Slide 15: Electronics Manufacturing Solutions
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 Specialized Tier 2 global EMS provider Increasing o
Slide 16: EMS Business
EMS Business Computer Comm Medical Industrial Aero/Def East 0.24 0.26 0.1 0.23 0.17 Communications Industrial Medical Computer 2008 Projected Aerospace/ Defense Complexity, design capabilities, and higher service levels Stronger customer relationships Higher barriers to entry due to certifications,
Slide 17: 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 18: Annual Sales and EPS
Annual Sales and EPS 2003 2004 2005 2006 2007 2008 Guidance Adjusted 0.24 0.48 0.61 0.71 0.71 2003 - 2007 CAGR 31% Note: Excludes restructuring / tax credit EPS (adjusted) 2003 2004 2005 2006 2007 2008 Guidance Sales 463 531.3 617.5 655.6 685.9 $ in Millions Sales 2003 - 2007 CAGR 10% $0.71 $0.76 Q3
Slide 19: Last Four Quarters Sales and EPS
Last Four Quarters Sales and EPS Q4 2007 Q1 Q2 Q3 Adjusted 0.25 0.18 0.27 0.16 Adjusted Diluted EPS Q4 2007 Q1 Q2 Q3 Sales 178.3 172.8 186.1 170 $ in Millions Sales $0.20 $0.15 $0.20 $0.16 2008 2008 Analyst Consensus
Slide 20: Balance Sheet Management
Balance Sheet Management 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Est. Adjusted Working Capital 0.049 0.138 0.134 0.028 0.02 0.024 0.024 0.024 0.025 0.025 Capital Expenditures Target 3% '97 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Est. Adjusted Working Capital 0.162 0.17 0.2 0
Slide 21: Net Earnings and Free Cash Flow
Net Earnings and Free Cash Flow 2003 2004 2005 2006 2007 2008 Est. Net Earnings 12.6 20 20.8 24.2 25.4 Free Cash Flow 16.7 1.3 29.5 31.4 32.5 16 Strong Free Cash Flow Indicates Quality of Earnings $ in Millions $15 $19
Slide 22: Capital Structure
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 Sept. YTD Cash 20.6 13.3 9.2 25.3 61 12 39 53 54 Debt 174.8 139.2 86.2 50.6 36.5 70 27 20 46 % 0.442 0.386 0.26
Slide 23: Responding to the Economic Downturn
Responding to the Economic Downturn Mix is toward higher margin and faster growing business Sensor and actuator products for diesel and turbocharger business Piezo products in electronic components Targeted EMS markets - medical, defense and aerospace, industrial over 50% Diversified business model
Slide 24: Value Proposition
Value Proposition 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
Slide 25: Appendix
Appendix CORPORATION
Slide 26: Sensors and Actuators Strategy
Sensors and Actuators 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 2009-2013 Sales Sensors & Actuators Auto 0.73 0.27 Sen
Slide 27: Sensors and Actuators Applications
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 Electronic Throttle Sensors Electric Actuators: Active Manifolds Turbochargers Diesel Systems
Slide 28: Electronic Components Strategy
Electronic Components 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, Tusonix)
Slide 29: Resistor & Frequency Products
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 Wi
Slide 30: Electronics Manufacturing Solutions Global Capability
Electronics Manufacturing Solutions Global Capability Target customers with complex needs. Target niche sectors - defense, aerospace, medical industrial. Provide turnkey services, design to direct ship. Leverage geographic footprint Local NPI and global volume assembly Global sourcing Strategy Sales
Slide 31: EMS Product Applications
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 Secu
Slide 32: Major CTS Competitors
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, Mtron, Rakon, RFMD, Vectron, Z-Comm Murata, Spectrum
Slide 33: Target Adjusted Return on Invested Capital (ROIC)
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 7.9
Slide 34: Financial Summary
Financial Summary 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.
Slide 35: Other Financial Data - Income Statement
Other Financial Data - Income Statement 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.
Slide 36: Other Financial Data - Balance Sheet Metrics
Other Financial Data - Balance Sheet Metrics CTS CORPORATION APPENDIX 1 CTS Corporation Reconciliation of Gross Margin to Adjusted Gross Margin ($ in millions) Q3 Q2 Q1 Q2 Q1 2008 2008 2008 2006 2006 Gross Margin $ 33.4 $ 40.2 $ 33.8 $ 31.8 $ 30.0 Charges (credits) to reported gross Margin : Restruc