Elkhart, IN…CTS Corporation (NYSE: CTS) today announced second quarter 2009 revenues of $120.4 million, 2% higher than first quarter 2009 revenues of $118.1 million.  Second quarter 2009 net loss, on a GAAP basis, of $7.0 million, or $0.21 per diluted share, includes an international cash repatriation related tax charge, primarily non-cash, of $9.1 million, or $0.27 per diluted share. The first quarter 2009 net loss, on a GAAP basis, of $35.6 million, or $1.06 per diluted share, included charges for restructuring and non-cash goodwill impairment of $35.4 million, or $1.03 per diluted share.  Second quarter adjusted net earnings of $2.1 million, or $0.06 per diluted share, compares favorably to the first quarter adjusted net loss of $1.1 million, or $0.03 per diluted share. 

Second quarter 2009 adjusted earnings improvement over the first quarter 2009 was driven by higher revenues, savings from reduced headcount and a gain on the sale of an idle facility. The Company continues to take prudent short-term actions, including tighter management of all discretionary spending and other initiatives to align its costs with current production volumes. Global headcount has been reduced by approximately 23% from mid-2008 levels.

Second quarter 2009 Components and Sensors segment revenues increased 17% from the first quarter 2009 driven by a 31% improvement in automotive product shipments as global demand, especially in Asia, recovered modestly combined with some new programs. Sales of electronic component products were flat from the first quarter 2009, although there were pockets of modest growth in infrastructure product sales.  EMS segment sales declined 7% from the first quarter 2009 reflecting previously announced planned end-of-life sales reductions to Hewlett-Packard (HP) and lower overall computer and medical market demand. 

Second quarter 2009 adjusted diluted earnings per share of $0.06 compares to $0.27 in the same period last year, reflecting 35% lower revenues from the impact of the global recession. Components and Sensors segment sales decreased 41% from the same period last year, impacted by a 51% decline in North American light vehicle production and lower demand across all electronic component markets. EMS segment sales decreased 31% from the same period last year, primarily reflecting previously announced planned end-of-life sales reductions to HP and lower sales in the communications market.

CTS’ new business wins continued at a strong pace during the second quarter 2009. Revenues from these wins are expected to exceed $80 million over their five year program lives beginning approximately mid-2010. Within the Components and Sensors segment, new business awards included pedal module business with new European and Asian customers including applications for electric and hybrid cars as well as electronic components for Asian and U.S. telecom providers. Within the EMS segment, new business wins included green applications with charging stations for electric cars. Overall, total CTS year-to-date new business wins are expected to add over $160 million in revenues over their program lives with shipments beginning in mid-2010.

Cash flow from operations was $19.7 million in the second quarter 2009, increasing $1.9 million over the same period last year and $23.7 million higher from the first quarter 2009. As planned, capital expenditures of $1.4 million were $4.8 million lower than the same period last year and unchanged from the first quarter.

Commenting on second quarter results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated, “The business environment continues to be challenging, but stable. Strong new business wins and effective cost containment measures are contributing to better earnings performance and strong cash flow, despite pressures from the global recession. As our diversification strategies succeed with new customers, business awards and design wins, we believe CTS will emerge from the recession as a stronger company.”

Based on the year-to-date performance and ongoing cost structure management initiatives, the Company expects second half 2009 earnings to improve over the first half, despite limited forward visibility and continued weak economic conditions.  Full-year free cash flow is also projected to be positive. 
 

SEGMENT INFORMATION

(Dollars in millions)     

		Second Quarter 2009				Second Quarter  2008				First Quarter 2009
				Segment				Segment				Segment
		Net		Operating		Net		Operating		Net		Operating
		Sales		Earnings		Sales		Earnings		Sales		(Loss) Earnings
Components & Sensors		$49.6		$2.1		$84.1		$10.2		$42.3		($3.4)
Electronics Manufacturing Services (EMS)		70.8		1.1		102.0		3.7		75.8		3.3
Segment Operating Earnings / (Loss)				3.2				13.9				(0.1)
Expenses not allocated to business segments:
- Restructuring and related charges								(0.1)				(2.2)
- Goodwill impairment												(33.2)
Total		$120.4		$3.2		$186.1		$13.8		$118.1		( $35.5)

Components & Sensors: Components and Sensors sales increased $7.3 million, or 17%, from the first quarter of 2009 reflecting improved automotive product sales primarily in Asia and Europe. Electronic component product demand remained flat. Segment operating earnings increased $5.5 million from a loss of $3.4 million in the first quarter primarily on higher sales volume, cost containment and a gain on the sale of an idle facility.

Components and Sensors second quarter 2009 sales decreased $34.5 million, or 41%, from the second quarter of 2008, from the impact of the global recession.  Sales of automotive sensor and actuator products declined $21.9 million, or 41%, and electronic component product sales declined $12.6 million, or 40%. Segment operating earnings of $2.1 million was unfavorable to the second quarter of 2008 due to lower volumes, partially offset by reduced operating expenses and a gain on the sale of an idle facility.

EMS: EMS sales decreased $5.0 million, or 7%, from the first quarter 2009, primarily from decreased demand in the computer, medical and defense and aerospace markets, partially offset by increased sales into industrial and communications markets. Segment operating earnings of $1.1 million decreased $2.2 million primarily due to lower volumes and less favorable product mix.

EMS sales decreased $31.2 million, or 31%, from the second quarter of 2008 reflecting lower sales in the computer, communications and industrial markets, partially offset by increased sales in the defense and aerospace and medical markets.  Segment operating earnings decreased $2.6 million from the second quarter of 2008 primarily on lower volumes.