July 23, 2012

FOR RELEASE:  Immediately

CTS ANNOUNCES SECOND QUARTER 2012 FINANCIAL RESULTS

Maintains 2012 Full-Year Adjusted Earnings Per Share Guidance
 

Elkhart, IN. . .CTS Corporation (NYSE: CTS) today announced second quarter 2012 revenues of $154.3 million, an increase of 5% from the same period last year and from the first quarter 2012. Second quarter 2012 net earnings were $3.3 million, or $0.10 per diluted share, compared to $4.1 million, or $0.12 per diluted share, in the same period last year. Included in the second quarter 2012 earnings were $0.08 per share of restructuring and related charges and included in the second quarter of 2011 were restructuring and legal charges of $0.02 per share. Excluding these items, adjusted second quarter 2012 earnings per share were up 29% at $0.18 compared to $0.14 in the same period last year.

Second Quarter Highlights

• CTS initiated a $5 million restructuring plan with expected annual savings of approximately $6 million. This plan will reduce approximately 260 positions, or 6% of CTS’ global headcount, throughout Asia, Europe and North America. CTS recognized $3.8 million, or $0.08 per share, of this $5 million plan in the second quarter; the remaining $1.2 million charge is expected to be recognized in the second half of 2012.  The plan will further improve our cost structure and capacity utilization.
   

• CTS’ EMS Thailand facility, which had been out of service since the October 2011 flood, is now fully operational with substantially all production having been transferred back to Thailand from the California EMS facilities. Second quarter 2012 earnings include insurance recoveries of $7.4 million and expenses and losses of approximately $5 million.  Year-to-date, flood-related reimbursements have exceeded costs by $1.5 million, due to timing.
   

• CTS has incurred approximately $0.6 million of Takata patent litigation costs year-to-date, of which $0.2 million was incurred in the second quarter. In July, the courts sided with CTS’ interpretation of the patent claim.  The Company is proceeding with the next stage of litigation.
   

• Non-cash pension expense was higher by approximately $1.2 million, or $0.02 per share, in the second quarter and $2.2 million, or $0.04 per share, year-to-date, compared to last year due to lower discount rates and asset returns.
   

• CTS’ second quarter debt balance decreased $11.7 million from the first quarter driven by strong cash flow.
   

• CTS’ new grill shutter actuator product was launched in May, one quarter earlier than originally planned.
   

• Production on CTS’ major smart actuator program is expected to begin as scheduled in late fourth quarter.  This program is slated for a North American medium-duty diesel engine application and is expected to add approximately $20 million in new revenues in 2013.
   

• On June 4, CTS celebrated its 50^th anniversary of trading on the New York Stock Exchange by visiting the NYSE trading floor and ringing the closing bell. This significant milestone honored  CTS’ rich tradition.

Second quarter 2012 Components and Sensors segment sales grew $8.8 million, or 13%, from the same period last year. This increase was driven primarily by higher automotive sensor and actuator sales of $7.0 million, or 17%, as Japanese automotive customers recovered from last year’s earthquake. Electronic component sales increased $1.8 million, or 7%, primarily from improved piezoceramic product demand, including HDD sales, and incremental sales from the Valpey-Fisher acquisition. EMS second quarter sales decreased $1.4 million, or 2%, year-over-year, primarily resulting from the continued impact of the Thailand flood, partially offset by new customer program ramps.

Second quarter cash flow from operations was $16.1 million, the highest level since the third quarter of 2009. Year-to-date cash flow from operations was $12.0 million, compared to $8.8 million in the same period 2011. Year-to-date capital expenditures were $6.9 million compared to $6.5 million last year.

During the second quarter of 2012, the Company repurchased approximately 300,400 shares for $2.9 million, at an average price of $9.68.  Year-to-date, the Company repurchased approximately 572,500 shares for $5.6 million, at an average price of $9.86.

Commenting on second quarter 2012 results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated, “We were pleased with our second quarter performance, despite the global economic slowdown. We believe that continued progress on new product introductions and strong new business wins will allow the Company to drive double-digit growth in Components and Sensors going forward.”

As a result of lower than expected global economic growth, including negative economic growth in Europe and a stronger dollar, management is lowering its full-year 2012 sales guidance from a range of a 10% to 13% increase over 2011, to 4% to 7%. However, as a result of expected restructuring savings, management is maintaining its 2012 adjusted earnings guidance of $0.75 to $0.80 per share.
 

 SEGMENT INFORMATION

(1)     EMS includes $1,769 of insurance recovery for property damage related to the flood at CTS Thailand’s manufacturing facility.
 

Components & Sensors: Components and Sensors second quarter 2012 sales increased $8.8 million, or 13%, from the second quarter of 2011. Automotive sensor and actuator sales increased $7.0 million, or 17%, driven primarily by higher pedal module sales to Japanese OEMs.  Sales of electronic components increased $1.8 million, or 7%, from improved piezoceramic product demand, including HDD sales, and incremental sales from the acquisition. Despite the higher sales, segment operating earnings before corporate and shared services charges decreased $0.4 million from the same period last year primarily from higher pension expenses.

Components and Sensors second quarter 2012 sales were essentially flat from the first quarter of 2012.  Within Automotive sensor and actuator products, the new grill shutter actuator product was launched one quarter earlier, while products sold in the European market were negatively impacted by the weak European economy. Sales of electronic component products include a full quarter of sales from the acquisition. Segment operating earnings before corporate and shared services charges improved $1.1 million from the first quarter of 2012 primarily from lower research and development expenses and a customer prototype reimbursement.
 

EMS: EMS second quarter 2012 sales decreased $1.4 million, or 2%, from the second quarter of 2011, due primarily to the impact from the Thailand floods, partially offset by new customer program ramps. Sales decreased in defense and aerospace, communications and computer markets, partially offset by increases in industrial and medical markets. Segment operating earnings before corporate and shared services charges increased $3.8 million, primarily from timing of flood insurance recoveries in the second quarter 2012 in excess of costs incurred.

EMS second quarter 2012 sales increased $6.9 million, or 10%, from the first quarter of 2012. Sales demand increased primarily in the communications, industrial and medical markets, partially offset by lower sales into the defense and aerospace market. The second quarter segment operating earnings before corporate and shared services charges increased $5.6 million from the first quarter, primarily from timing of flood insurance recoveries in excess of costs incurred and higher sales.
 

Conference Call
As previously announced, the Company has scheduled a conference call on Tuesday, July 24, 2012 at 11:00 a.m. EDT.  Those interested in participating may dial 800-230-1951 (612-332-0932, 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 Tuesday, July 24, 2012 through 11:59 p.m. EDT on Tuesday, July 31, 2012. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 254229.  Also, please note that a live audio webcast of the conference call will be available and can be accessed directly from the Web sites of CTS Corporation www.ctscorp.com, StreetEvents www.streetevents.com, Netscape www.netscape.aol.com, Compuserve www.compuserve.com and others.
 

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, communications, medical, defense and aerospace, industrial and computer markets. CTS manufactures products in North America, Europe and Asia. CTS' stock is traded on the NYSE under the ticker symbol "CTS.” 

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 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; unanticipated issues in integrating acquisitions; rapid technological change; general market conditions in the automotive, communications and computer industries, as well as conditions in the industrial, defense and aerospace and medical markets; reliance on key customers; unanticipated natural or other events such as the Japan earthquake and floods in Thailand; the ability to protect our intellectual property; pricing pressures and demand for our products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geographical risks.  For more detailed information on the risks and uncertainties associated with CTS’ business, see the reports CTS files with the Securities and Exchange Commission 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.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  - UNAUDITED 

OTHER SUPPLEMENTAL INFORMATION 

Condensed Consolidated Balance Sheets - Unaudited