Slide 1: April 2006
April 2006
Slide 2: Forward-looking statements
CTs CORPORATION Staternents about the Company's earnings outlook and its plans, estimates and beliefs conceming 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 limited to,
Slide 3: EMS Operations, Automotive Sensors, Global Operations
EMS Operations Automotive Sensors Global Operations Electronic Components
Slide 4: Segments and Markets
Segments Markets Segments and Markets Automotive Communications Other Computer Electronic Components and Sensors Electronics Manufacturing Services 41% 59% 6% 21% 23% 31% 23% 7% 2% 8% 29% 3% 14% Consumer Military & Aerospace Security Medical 11% 5% 1% Industrial 8% 8%
Slide 5: Business Growth Targets
- Automotive Sensors - Electronic Components Electronics Manufacturing Services 13 - 18% 4 - 7% 8 - 12% 9 - 13% Overall Components & Sensors: 10 - 14% Business Growth Targets Annual Sales Growth Product/Market Area (2005 - 2008)
Slide 6: Automotive Products Strategy
Strategy Aggressively expand product base. Content growth > unit growth. Broaden customer base. Leverage product/market strength into Asian market. Targeting Double-Digit Growth Automotive Products • – • •
Slide 7: Accelerator Pedal Modules: Awarded Platforms
Awarded 43 Platforms Industry trend is to adopt integrated pedals for complexity and cost reduction Total Available Market (Including Pedal Sensors) $150 $223 $266 $326 $363 $305 CTS Accelerator Pedal Modules Offer Performance, Quality and Cost Advantages CTS Sales $ in Millions $393 Actual Accelera
Slide 8: Asian Automotive Growth
CTS Sales $ in Millions Actual 10 Year Projected Growth In Vehicle Sales (17M Units) Asian Automotive Growth Asia Over 50% of Growth China regulations driving local content CTS Operations in Taiwan and China
Slide 9: Electronic Components Strategy
Focus on high margin engineered electronic components. Aggressively introduce new products and expand the customer base. Leverage our global footprint and Asian manufacturing. Strategy • • • Improving Financial Performance Electronic Components
Slide 10: Electronic Components Markets Served
Computing and Other Markets Communications Handset Communications Infrastructure Focused on Higher Margin Growth Markets Electronic Components – Markets Served
Slide 11: Electronic Components Products/Applications and 2005 Design Wins
WiMAX Optical Networking Telematics Cellular Repeaters Wireless Base Station Satellite Communications OCXO RF Module Filter Design Wins Design Wins Design Wins Design Win Design Wins Design Wins Electronic Components – Products/Applications 2005 Design Wins
Slide 12: Electronics Manufacturing Solutions Strategy
Target customers with complex needs. Offer full-service flexibility. Leverage geographic footprint. Global sourcing. Local NPI Ù global completion. Grow organically and through acquisitions. Electronics Manufacturing Solutions i i i – – i Strategy
Slide 13: EMS Customer Characteristics and Needs
CUSTOMER Characteristics/Needs EMS Companies EMS Industry TIER Large/Global > $2B. Optimized to Low Mix - High Volume. TIER Medium/ Regional/Global $200M - $2B. Optimized to High Mix - Med. Volume. TIER Small/Regional < $200M. Optimized to High Mix - Low Volume. g Large OEMs g Low Mix; High Volume g
Slide 14: EMS Growth Focused on High Margin Segments
Growth Focused on High Margin Segments 95% 71% Top 5 EMS Customers Communications Other Industrial Medical Computer Sales By Market Aerospace/ Defense More Complex Less Complex High Volume / Low Mix Low Volume / High Mix EMS Business CTS Markets
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: New Products/Acquisition Driving Growth
$ in Millions 2005 2004 2003 2002 Sales New Products/Acquisition Driving Sales Growth
Slide 17: Earnings Growing Faster Than Revenues
2002 2003 2004 2005 Adjusted EPS Earnings Growing Faster Than Revenues
Slide 18: Adjusted Operating Expenses (Percent of Sales)
Adjusted Operating Expenses (Percent of Sales) Expense Leverage Contributing to Earnings Growth 12% 12.5% Target
Slide 19: Strong Cash Earnings and Free Cash Flow
Cumulative Free Cash Flow $ in Millions Cumulative Cash Earnings Cumulative Free Cash Flow Strong Cash Earnings and Free Cash Flow
Slide 20: Balance Sheet Management: Efficient Utilization of Capital
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
Current Capital Structure Total Debt to Capitalization 195 82 Total Debt Cash Debt to Capitalization Balance Sheet Management Leverage Ratio Within Target Range of 20% - 30% Balanced Maturities
Slide 22: Both Segments Have Comparable ROA Targets
Target Adjusted Return on Assets 5.0% 12.0% 1.0 1.5 1.7 2.5 OPERATING MARGIN 7.0% 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
Slide 23: Growth Strategies are Working
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: CTS Corporation: Everywhere. Every Day.
CTs CORPORATION Everywhere. Every Day.
Slide 25: 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 tec
Slide 26: Acquisition Strategy: SMTEK
CTS’ Strength In SMTEK’s Strength In § PCBA design for manufacture and test § Complex PCBA operations § Flexible test capability § Market-specific certifications § Backplane and enclosure design § High-mix box build operations § Global sourcing § Direct-to-end-customer logistics Acquisition Strategy
Slide 27: Growing Automotive Product Content
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 28: Automotive Product Applications
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 Safety S
Slide 29: Active Manifold Actuators
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 CTS’ innovative solution provides performance and reliability advantages $335 $ in Millions Actual Active Manifo
Slide 30: Belt Tension Sensor
CTS’ Belt Tension Sensor provides superior measurement accuracy U.S. regulations require 100% of all new light vehicles to have enhanced occupancy sensing systems by 2006 . $13 $33 $80 $69 $63 Total Available Market $78 $ in Millions Belt Tension Sensor Awarded Platforms 30+% Market Share
Slide 31: Major CTS Competitors
Major CTS Competitors PRODUCTS Automotive Products Frequency Products - Infrastructure Ceramic Filters Resistor Networks Electronics Manufacturing Services COMPETITION AB Electronics, Alps, Bosch, Delphi, Denso, Hella, Mikuni, Siemens C-MAC, M/A Com, Mtron, Raltron, Pericom, Sirenza, Vectron, Z-Comm
Slide 32: 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. Financial Summary
Slide 33: Other Financial Data – Income Statement
Note: Data shown excludes income tax adjustment and material asset gains. Other Financial Data – Income Statement
Slide 34: Other Financial Data – Balance Sheet Metrics; Regulation G Appendix
Other Financial Data – Balance Sheet Metrics CTS Corporation Regulation G Appendix CTS Corporation Reconciliation of Earnings Per Share to Adjusted Earnings Per Share Full Year Q4 Q2 Q2 Q3 Q3 Q2 Q1 Earnings per share $ 0.22 $ 0.10 $ 0.18 (1 ) $ 0.17 $ (0.41 ) $ (0.08 ) $ (0.06 ) $ 0.57 $ 0.53 $ 0.36