April 30, 2007

FOR RELEASE:  Immediately

CTS REPORTS FOURTH QUARTER AND FULL-YEAR 2006 FINANCIAL RESULTS
Reports Completion of Internal Investigation
Reconfirms Previous Guidance for 2007

Elkhart, IN…CTS Corporation (NYSE: CTS) today announced fourth quarter and full-year 2006 financial results and the completion of its internal investigation and account reconciliations at the Company’s EMS Moorpark, California manufacturing location, first reported on February 9, 2007. 

Fourth quarter 2006 revenues were $173.5 million, a 12% increase over fourth quarter 2005 revenues. Fourth quarter net earnings of $7.7 million, or $0.20 per diluted share, compares to net earnings of $7.5 million, or $0.19 per diluted share, in the fourth quarter of 2005. Free cash flow was $14.0 million in the fourth quarter of 2006, compared to $12.3 million in the fourth quarter of 2005.

The fourth quarter revenue increase from 2005 was driven by a 17% increase in EMS segment sales, reflecting increased penetration in defense/aerospace, medical and communications markets.  Components and Sensors segment sales increased 5%, primarily from strong automotive new product demand. Sales increases in these areas were partially offset by general weakness in electronic component demand, lower component sales for handset applications, which is a market the Company has now exited, and lost sales stemming from the fourth quarter 2005 divestiture of the Low Temperature Co-fired Ceramic (LTCC) product line.

Full-year 2006 revenue of $655.6 million increased 6% over 2005. Components and Sensors segment sales increased 7% year-over-year with automotive product revenues growing 13% and sales into infrastructure applications growing over 20%.  EMS segment sales increased 6% year-over-year, primarily due to stronger growth in defense/aerospace and medical markets and higher demand for communications infrastructure products.

“We continue to be very pleased with the success of our new business development initiatives,” said Donald Schwanz, CTS Chairman and Chief Executive Officer.  “Automotive product sales, which grew 18% in the quarter year-over-year, have grown at double-digit rates over the last three years.  Design wins for electronic components in infrastructure applications are at record levels, up almost 40% over 2005.  And we added more new EMS customers than any year in our history.”

Full-year 2006 net earnings of $24.2 million, or $0.63 per diluted share, increased over the 2005 restated net earnings of $20.8 million, or $0.53 per diluted share. The 2006 results included a charge of $0.08 per diluted share for the consolidation of the Berne, Indiana operation and the further impairment of an idle facility lease. The 2005 restated results also included a net $0.08 per share negative impact from repatriation-related tax expense, net of a benefit relating to the reversal of income tax reserves, and a net gain on the sale of excess equipment and the divestiture of our LTCC business unit. Full-year diluted earnings per share, adjusted to exclude these items, were $0.71 in 2006 compared to restated $0.61 in 2005, for a year-over-year increase of 16%.

During 2006, the Company generated free cash flow of $31.4 million, compared to $29.5 million in 2005. Free cash flow in 2006 is the highest reported since 1998.

CTS has completed its internal investigation and account reconciliations at its EMS Moorpark, California manufacturing location.  This investigation, which utilized forensic accountants and legal advisers, was conducted with the oversight of the Audit Committee of the Board of Directors of the Company. The net after-tax impact of the correction of accounting entries negatively impacted the Company’s reported net earnings by approximately $3.4 million.  Management has determined that both full-year 2005 and nine months ended October 1, 2006 earnings were negatively impacted by $1.5 million and $1.9 million, respectively, with diluted earnings per share impact of $0.04 in 2005 and $0.05 in the first three quarters of 2006.

The Company expects 2007 to be another year of sales and earnings growth. Management currently expects full-year 2007 sales to increase 7% to 10% over 2006, with diluted earnings per share in the range of $0.76 to $0.80.
 

SEGMENT INFORMATION
(Dollars in millions)

Components & Sensors: Components and Sensors sales in the fourth quarter of 2006 increased by $3.4 million, or 5%, from the fourth quarter of 2005, reflecting continued strong sales growth in new automotive products, partially offset by declining component sales into mobile handset applications, which we have now exited, and from the divestiture of the LTCC product line in 2005. Operating earnings of $6.4 million declined $5.8 million from the restated fourth quarter of 2005, primarily due to higher than planned production costs for a new automotive product, commodity price increases and reduced pension income.  In addition, the fourth quarter 2005 earnings benefited from a $2.3 million gain on the sale of assets.

Segment sales increased by $0.8 million, or 1%, over the third quarter of 2006, primarily from improved automotive product demand, offset by generally weaker electronic component demand. Segment operating earnings increased $0.7 million over the third quarter of 2006, primarily from the impact of higher royalties and slightly higher volumes.

EMS: EMS fourth quarter 2006 sales increased by $15.5 million, or 17%, from 2005, mainly driven by increased sales in the defense/aerospace, medical and communications markets, partially offset by lower demand for computer data storage equipment. Segment operating earnings of $2.7 million were $1.4 million higher than the restated fourth quarter of 2005 primarily on higher volumes.

Fourth quarter 2006 EMS sales increased $7.0 million, or 7%, over third quarter 2006 from increased penetration in defense/aerospace and medical markets, partially offset by lower demand for computer data storage equipment.  Operating earnings decreased $0.9 million from the third quarter of 2006, primarily from expenses incurred in a new customer start-up, excessive freight costs, labor inefficiencies and pricing pressures, partially offset by the impact of higher sales.

# # # #

Conference Call
As previously announced, the Company has scheduled a conference call on Tuesday, May 1, 2007 at 11:00 a.m. (EDT). The dial-in number for the conference call is 866-835-8903 (703-639-1410, if calling from outside the U.S.). No access code is needed. There will be a replay of the conference call from 4:15 p.m. (EDT) on Tuesday, May 1, 2007, through 11:59 p.m. (EDT) on May 8, 2007. The telephone number for the replay is 800-475-6701, (320-365-3844, if calling from outside the U.S.). The access code is 872039.

There will also be a live audio webcast of the conference call which can be accessed directly from the Web sites of CTS Corporation (http://www.ctscorp.com), StreetEvents (http://www.streetevents.com), Netscape (http://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/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.” 
 

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.  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, rapid technological change and general market conditions in the automotive, communications and computer industries; reliance on key customers; CTS’ ability to protect its intellectual property; pricing pressures and demand for CTS’ products; risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks; and the impact of the accounting misstatements at its Moorpark, California location.  For more detailed information on the risks and uncertainties associated with CTS’ business, see the reports CTS files with the SEC.  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
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
OTHER SUPPLEMENTAL INFORMATION