CTS maintains Full-Year 2011 guidance

Net earnings were USD 4.1 million, or USD 0.12 per diluted share, in the second quarter 2011 compared to net earnings of USD 5.9 million, or USD 0.17 per diluted share, in the second quarter 2010. Included in second quarter 2011 earnings were USD 0.02 per share of restructuring charges and certain legal expenses. Excluding these two items, adjusted second quarter earnings per share were USD 0.14. Earnings decreased year-over-year primarily as a result of lower expected automotive sales from the disruption caused by the Japan earthquake. However, these sales shortfalls are anticipated to begin to recover in the fourth quarter as OEM production ramps up and inventories are replenished. Components and Sensors segment sales decreased 6% from the same quarter last year primarily due to a 10% decrease in automotive product sales. Electronic component product sales were flat year-over-year. We estimate the second quarter impact from the Japan earthquake on the Components and Sensors segment sales was a decrease of approximately USD 6-7 million, with an earnings per share impact of approximately USD 0.04-0.05 per share. EMS segment sales grew 18% from the same period last year with increases reported across all markets served. This growth resulted from new program launches with existing and new customers, primarily driven by a 46% increase of sales into industrial markets. CTS continues to develop new highly-engineered products in the Components and Sensors segment to support launch activities in the hard disk drive (HDD) and smart actuator programs. As a result, research and development expense increased in the second quarter 2011 to USD 4.6 million, or 6.7% of Components and Sensors segment sales, compared to USD 4.3 million, or 6.0% of segment sales, in the second quarter 2010. Cash flow from operations was USD 11.3 million in the second quarter 2011, significantly improved over USD 1.0 million in the same period last year. First half 2011 cash flow from operations was USD 8.8 million compared to USD 6.3 million in the first half of 2010. Capital expenditures were USD 3.4 million, or 2.3% of total sales, in the second quarter of 2011, compared to USD 4.7 million, or 3.4% of total sales, in the same period last year. Year-to-date capital expenditures were USD 6.5 million, compared to USD 6.2 million in the same period last year. Commenting on second quarter 2011 results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated: “While our second quarter results were in line with expectations, we look forward to a stronger second half as we begin to launch new programs like piezoceramic elements for disk drive applications, a global pedal program and increased sales to our key Japanese automotive OEMs who will begin to ramp up their production. Our key initiatives to further improve our cost structure include expanding our low cost facilities in Mexico and Thailand, and starting up a new manufacturing facility in India, which is slated to be operational later this year.” Based on first half results and the current outlook, management maintains its guidance of full-year 2011 sales increase in the range of 9-13% over 2010 and full-year 2011 earnings per diluted share in the range of USD 0.70-0.75. Segment information Components & Sensors Components and Sensors second quarter 2011 sales decreased USD 4.2 million, or 6%, from the second quarter of 2010. The reduction resulted primarily from lower automotive product sales. Sales of electronic components were unchanged year-over-year. Segment operating earnings of USD 4.8 million decreased from the same period in the prior year on lower sales, higher commodity prices and higher research and development expense. Components and Sensors sales decreased USD 4.0 million, or 6%, from the first quarter of 2011 driven by decreased automotive product demand. Sales of electronic components increased 6% over the first quarter on improved demand across most product lines. Segment operating earnings decreased USD 0.9 million primarily due to lower sales, partially offset by lower operating costs. EMS EMS sales increased USD 12.3 million, or 18%, from the second quarter of 2010 reflecting improved demand across all markets served. New program launches with existing and new customers contributed to higher sales of USD 6.5 million in the industrial market, USD 2.6 million in the computer market, USD 2.1 million in the defense and aerospace market, USD 0.5 million in the medical market and USD 0.5 million in the communications market. Segment operating earnings of USD 0.4 million improved from the operating loss of USD 0.2 million in the second quarter of 2010, primarily resulting from higher sales. EMS sales decreased USD 0.6 million, or 1%, from the first quarter 2011, on lower defense and aerospace and computer sales, partially offset by stronger sales into the industrial market. Segment operating earnings in the second quarter were USD 0.4 million, compared to a breakeven in the first quarter 2010, primarily as a result of cost control.