October 28, 2008

FOR RELEASE:  Immediately

CTS ANNOUNCES THIRD QUARTER 2008 RESULTS
 

Elkhart, IN…CTS Corporation (NYSE: CTS) today announced third quarter 2008 revenues of $170.0 million and net earnings of $7.6 million, or $0.21 per diluted share, compared to revenues of $174.8 million and earnings of $7.8 million, or $0.20 per diluted share, in the third quarter 2007. Third quarter 2008 results include a net benefit of $0.05 per share from a tax credit offset by restructuring and related charges. Excluding these two items, adjusted diluted earnings per share of $0.16 met analyst consensus. Adjusted diluted earnings per share decreased from the prior year primarily on lower sales, including the impact of some accelerated production and sales into the second quarter, and a planned increase in research and development expenses.

The previously announced non-cash tax benefit of $4.0 million, or $0.11 per diluted share, resulted from the release of a valuation allowance due to sustained profitability at an Asian location.  The pre-tax restructuring and related charge of $3.5 million, or $0.06 per diluted share, resulted from the elimination of approximately 60 positions and writing off certain leasehold improvements.  The restructuring initiatives are proceeding on schedule.

Third quarter 2008 revenue decreased 3% from the third quarter of 2007 driven by an 8% decrease in EMS segment sales from expected declines in sales into the computer market, partially offset by higher defense and aerospace and communications sales. Components and Sensors segment sales increased 5% from higher sales of automotive sensor and actuator products and higher piezoceramic and electromagnetic product sales, partly offset by reduced sales of electronic components for infrastructure applications.

“Our third quarter earnings were in line with our expectations and analyst consensus, despite an increasingly challenging economic environment. Positive year-over-year growth in our sensor and actuator sales was very encouraging notwithstanding the severe downturn in the automotive industry. We continue to win new sensor programs supporting future growth and remain committed to investing in research and development activities to launch new products. Our year-to-date design wins in wireless infrastructure applications are also up a healthy 23%. Our increasingly diversified business model combined with new customers and product introductions is expected to help CTS continue to perform profitably with positive free cash flow through the current difficult economic environment,” stated Vinod M. Khilnani, CTS President and Chief Executive Officer.

Based on the year-to-date performance and a very difficult and uncertain economic environment, fourth quarter sales are expected to decline 3% - 5% sequentially from the third quarter.  As a result, we now expect full year 2008 sales to be essentially flat from 2007 compared to the Company’s previously anticipated year-over-year sales growth of 5% - 8%.  Adjusted 2008 earnings per share guidance is $0.71 to $0.76 per diluted share compared to our previous guidance of $0.79 to $0.84.  Adjusted 2008 earnings per share guidance excludes the third quarter tax credit and full year restructuring and related charges.
 

SEGMENT INFORMATION
(Dollars in millions)                                                                                      

Components & Sensors: Components and Sensors third quarter 2008 sales increased by $3.7 million, or 5%, from the third quarter of 2007 primarily from increased sales of automotive sensor and actuator products and higher sales of piezoceramic and electromagnetic products.  Despite higher volumes, segment operating earnings of $5.7 million decreased $0.3 million from the third quarter of 2007 primarily from the impact of certain shipments which were accelerated into the second quarter due to the Olympic games in China and planned increased investment in research and development activities. Operating earnings, as a percent of sales, were 8% in the third quarter compared to 9% in the same period last year.

Components and Sensors sales decreased $11.6 million, or 14%, from the second quarter of 2008 primarily reflecting lower automotive sensor and actuator product demand and accelerated shipments into the second quarter discussed earlier. Segment operating earnings decreased $4.5 million primarily on lower sales volume.

EMS: Segment sales decreased $8.5 million, or 8%, from the third quarter of 2007 primarily reflecting expected declines in sales into the computer market and lower sales into the industrial market, partially offset by higher sales into defense and aerospace, medical and communications markets.

Segment operating earnings decreased $1.2 million from the third quarter of 2007 primarily from lower volumes.  Operating earnings, as a percent of sales, were 3% in the third quarter of 2008 compared to 4% in the same period last year.

Segment sales decreased by $4.5 million from the second quarter 2008, primarily from expected declines in sales into the computer market and decreased sales in the communications market, partially offset by increased sales in medical and defense and aerospace markets.  Segment operating earnings of $2.7 million decreased $1.0 million primarily on lower volumes, product mix and pricing.
 

Conference Call
As previously announced, the Company has scheduled a conference call on Wednesday, October 29, 2008 at 11:00 a.m. EDT. Those interested in participating may dial 800-230-1074 (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, October 29, 2008, through 11:59 p.m. EST on Wednesday, November 5, 2008. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 963049. 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.”   

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, potential changes in the economy generally and in respect to the businesses in which CTS operates; rapid technological change 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; the Company’s successful execution of its restructurings and profit improvement plans; and risks associated with CTS’ international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks.  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.

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