CTS Announces First Quarter 2009 Results

CTS Corporation (NYSE: CTS) today announced first quarter 2009 revenues of $118.1 million, compared to $172.8 million in the same period last year, reflecting the impact of the global recession. The adjusted net loss in the first quarter 2009, which excludes charges for restructuring and non-cash goodwill impairment, was $1.1 million, or $0.03 per diluted share, which compared to net earnings of $6.3 million, or $0.18 per diluted share, in the same period last year. The GAAP net loss in the first quarter 2009, which includes $2.2 million of restructuring charges and $33.2 million of non-cash charges for goodwill impairment, was $35.6 million, or $1.06 per diluted share.

The previously announced restructuring actions taken in the first quarter are projected to save approximately $5 million annually with an expected payback of less than six months. The first quarter results benefited from the restructuring actions taken in the second half of last year through the first quarter of 2009. With global headcount reduced by approximately 20%, the Company’s cost structure has been permanently reduced by approximately $15 million. In addition, certain temporary actions were implemented during the first quarter of 2009, including a worldwide salary freeze, suspension of the Company’s 401(K) match, temporary reductions in salaries and implementation of furlough programs to align labor costs with lower production volumes. As a result, the adjusted $0.03 loss per diluted share compares favorably to expectations.

As a result of the broad-based global declines in the stock market, there was a significant decrease in the Company’s market capitalization during the first quarter 2009. Accordingly, the Company impaired its goodwill resulting in a non-cash charge of $33.2 million, or $0.98 per diluted share. This charge does not impact the Company’s current or future cash flows, liquidity or its debt covenants.

Despite the adverse global economic environment, CTS’ pace of new business wins was encouraging during the first quarter 2009. Revenues from these wins exceed $80 million over their program lives. Within the Components and Sensors segment, new business awards included pedal module business for sub-compact vehicles, smart actuators and sensors for diesel engine applications, turbocharger sensors for European markets, piezoceramics for medical ultrasound and mini-joysticks for wireless cell phone gaming. Within EMS, new business wins included encrypted electronics for security systems and complex controls for the A3 Bradley Vehicle.

Components and Sensors segment sales decreased 46% from the same period last year, impacted primarily by declines in North American light vehicle production of over 50% during the first quarter of 2009 compared to the same period last year. While sales of electronic component products have decreased year-over-year reflecting overall market softness, the Company’s diversification efforts have resulted in improved sales into Asia.

EMS sales decreased 20% from the same period last year, reflecting previously announced planned end-of-life sales reductions to Hewlett-Packard. However, sales into targeted markets have shown strength, as sales in defense and aerospace and medical markets improved double-digit year-over-year. In addition, the favorable sales mix combined with cost improvements resulted in improved profitability in this segment.

Cash flow used in operations was $4.0 million, $1.5 million favorable from the same period last year. Capital expenditures of $1.4 million were $2.1 million lower than the same period last year.

Commenting on first quarter results, Vinod M. Khilnani, CTS President and Chief Executive Officer, stated, "Although customer demand decreased significantly due to the global recession, new business wins and design activity remained strong. As a result of taking proactive actions that have significantly reduced the Company’s cost structure and cash flow needs, CTS is expecting to emerge from the recession as a leaner and more profitable company to better serve its customers and enhance shareholder value.”

With the uncertainty of market conditions and very limited visibility by customers in the current environment, no specific sales and earnings guidance is being provided at this time. However, management continues to take actions designed to keep CTS profitable on a full-year adjusted basis in 2009 and expects to generate positive free cash flow for the year.

Components & Sensors: Components and Sensors first quarter 2009 sales decreased $35.5 million, or 46%, from the first quarter of 2008. The sales decline was primarily related to lower sales of automotive sensor and actuator products, with declines in sales of electronic component products. Segment operating loss of $3.4 million was unfavorable to the first quarter of 2008 due to lower volumes, partially offset by reduced operating expenses.

Components and Sensors sales decreased $15.7 million, or 27%, from the fourth quarter of 2008 reflecting lower automotive sensor and actuator product and electronic component product demand. Segment operating earnings decreased $5.3 million primarily due to lower sales volume.

EMS: EMS sales decreased $19.1 million, or 20%, from the first quarter of 2008 reflecting lower sales in the computer, industrial and communications markets, partially offset by increased sales in the defense and aerospace and medical markets. Despite lower sales, segment operating earnings improved $1.2 million from the first quarter of 2008, primarily as a result of cost control. Operating earnings, as a percent of sales, were 4% in the first quarter of 2009 compared to 2% in the first quarter of 2008.

EMS sales decreased $29.0 million, or 28%, from the fourth quarter 2008, primarily from decreased demand in the communications and industrial markets. Sales in medical and defense and aerospace markets declined slightly. Segment operating earnings of $3.3 million decreased $0.7 million primarily due to lower volumes, partially offset by cost control.

Conference Call

As previously announced, the Company has scheduled a conference call on Wednesday, April 29, 2009 at 11:00 a.m. EDT. Those interested in participating may dial 800-230-1085 (612-234-9960, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call available from 1:30 p.m. EDT on Wednesday, April 29, 2009, through 11:59 p.m. EDT on Wednesday, May 6, 2009. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 995978. There will also be a live audio webcast of the conference call which can be accessed directly from the Web sites of CTS Corporation (www.ctscorp.com), StreetEvents (www.StreetEvents.com), Netscape (www.netscape.com), Compuserve (www.compuserve.com) and others. AOL subscribers will have access through the Personal Finance section of AOL.

About CTS

CTS is a leading designer and manufacturer of electronic components and sensors and a provider of electronics manufacturing services (EMS) to OEMs in the automotive, computer, communications, medical, defense and aerospace and industrial markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.” To find out more, visit the CTS Web site at www.ctscorp.com.

Safe Harbor Statement

This press release 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, statements that reflect our current expectations concerning future results and events and any other statements that are not based solely on historical fact. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. These forward-looking statements are made subject to certain risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from those presented in the forward-looking statements, including, without limitation: changes in the economy generally and in respect to the businesses in which CTS operates, including those resulting from the current global financial and credit crisis; pricing pressures and reduction in demand for CTS’ products, especially if economic conditions do not recover or continue to worsen in CTS’ served markets, including but not limited to: the automotive, computer equipment or communications markets; disruption, uncertainty or volatility in the credit markets that could adversely impact the availability of credit already arranged by CTS and the availability and cost of credit in the future; the financial condition of our customers, including the ability of customers (especially those that may be highly leveraged and those with inadequate liquidity) to maintain their credit availability or ongoing viability; the Company’s successful execution of restructurings and profit improvement plans; risks associated with CTS’ international operations, including trade and tariff barriers; currency fluctuations and their effects on our results of operations and financial position; changes in performance of equity and debt markets that could affect the valuation of the assets in CTS’ pension plans and the accounting for pension assets, liabilities and expenses; political and geopolitical risks; rapid technological change in the automotive, communications and computer industries; reliance on key customers; and CTS’ ability to protect its intellectual property. For more detailed information on the risks and uncertainties associated with CTS’ business, see the reports CTS files with the SEC, available at http://www.ctscorp.com/investor_relations/investor.htm. CTS undertakes no obligation to publicly update its forward-looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes.