CTS Profits Remain Steady

October 23, 2012

News Release

Elkhart, Ind. -- CTS Corporation (NYSE: CTS) today announced third quarter 2012 revenues of $137.4 million, a decrease of 6% from the same period last year. Third quarter 2012 net earnings were $5.9 million, or $0.17 per diluted share, same as the third quarter last year. Included in the third quarter 2012 earnings were $0.02 per share of restructuring and $0.01 per share of other charges. Excluding these charges, third quarter 2012 adjusted earnings per share were $0.20, 18% higher than the same period last year and 11% higher than the previous quarter.

The Components and Sensors segment experienced strong year-over-year sales growth with a 9.4% increase from new product launch activities for new customers and the successful integration of an acquisition made earlier this year. Electronic component sales improved $4.6 million, or 17%, primarily from improved piezoceramic product demand for HDD and incremental sales from the acquisition. Automotive sensor and actuator sales improved $1.9 million, or 5%, primarily from the launch of the new grill shutter actuator and a double-digit increase in pedal module sales.

CTS’ year-over-year sales decrease was driven by the lower margin EMS segment, which decreased $15.2 million, or 20%, year-over-year. The decrease resulted from the weak global economy as certain customers delayed orders, particularly in the defense and aerospace and communications markets, the lingering impact of the Thailand flood and the Company’s strategy to exit certain unprofitable accounts. EMS’ Thailand facility, which was impacted by the October 2011 flood, became fully operational during the third quarter 2012.

Third quarter cash flow from operations improved to $13.0 million compared to $4.5 million in the same period last year primarily driven by lower working capital requirements. Year-todate cash flow from operations almost doubled to $25.0 million, compared to $13.4 million in the same period last year. Year-to-date capital expenditures were $9.8 million, slightly lower than last year.

Restructuring Actions

The Company is taking proactive actions to strategically respond to the weak economic environment by further reducing its cost structure. During the fourth quarter, the Company is announcing plans to close its EMS operation in Tianjin, China. CTS’ electronic components operation will remain in this facility and expects growth with increasing piezo component production to support HDD applications. This action, combined with earlier restructuring actions taken in 2012, will reduce headcount by approximately 10%, and the Company’s global footprint by approximately 17%. Total fourth quarter restructuring charges are expected to be approximately $3 million.

Singapore Operational Efficiencies and Sale Leaseback Gain

As a result of manufacturing efficiency improvement initiatives, the Company has been able to reduce its manufacturing floorspace requirement at its Singapore facility. Accordingly, CTS entered into an agreement to sell and lease back approximately one-third of its Singapore facility. The transaction is expected to close in the fourth quarter 2012 with net proceeds of approximately $17.5 million and an anticipated pretax gain of approximately $7.5 million.

Third quarter pension expense, which is non-cash, and Takata litigation expenses were approximately $0.4 million, or $0.01 per share, higher in 2012 compared to the prior year.

Year-to-date, these expenses were approximately $2.9 million, or $0.06 per share, higher than the prior year.

During the third quarter, the Company authorized buying back of up to one million shares of stock, as the prior authorization of one million shares was completed. During the third quarter, the Company repurchased approximately 91,200 shares of common stock in open market transactions.

Commenting on third quarter 2012 results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated, “In response to the challenging and uncertain global economy, the Company has undertaken a number of strategic actions to further reduce our cost structure while driving our key growth programs. We believe that decisive actions during challenging economic times will allow CTS to emerge stronger when the markets rebound. New product launch activity in our Components and Sensors segment remains robust and we continue to win new business. We are generating strong free cash flow and our balance sheet remains strong.”

Based on the third quarter results, and the current outlook which considers the continued weak global economy and the negative impact of the Japan/China territory dispute, management is lowering its full-year 2012 sales guidance from a range of a 4% to 7% increase over 2011, to essentially flat, with the Components and Sensors segment growing 10% to 13% and EMS declining 9% to 12%. Accordingly, management is changing its 2012 adjusted earnings per share guidance to $0.70 to $0.75, from a range of $0.75 to $0.80 per share, which excludes the expected $7.5 million gain from the Singapore facility sale leaseback in the fourth quarter.