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Electronics Production | July 31, 2007

EMS segment drives CTS

CTS Corporation has announced second quarter 2007 revenues of $169.6 million and net earnings of $5.9 million.
Second quarter 2007 revenue increased 2% over the second quarter of 2006 driven by the EMS segment, where sales improved 5%. Components and Sensors segment sales decreased 1%, primarily from weakness in electronic component demand. Automotive component sales, however, were up 6%.

Second quarter 2007 earnings of $5.9 million, improved over net earnings of $5.3 million, in the second quarter of 2006. Second quarter 2007 net earnings were adversely impacted by $1.2 million, of costs associated with the internal investigation and account reconciliations at CTS' California EMS locations. Second quarter 2006 diluted earnings per share included restructuring and related costs of $0.03 per diluted share for consolidation of the Berne, Indiana operation.

Commenting on second quarter results, Vinod M. Khilnani, CTS President and Chief Executive Officer, stated, “Despite a challenging environment, new products and new customers helped CTS achieve continued growth in automotive products and targeted EMS markets. Earnings per share improved notwithstanding CTS' California EMS investigation costs and new plant start-up in Czech Republic. Based on current expectations, we are maintaining our full-year 2007 earnings per share guidance of $0.71 to $0.75 and expect our 2007 sales growth to be around 5% to 6%."

Components and sensors sales decreased $0.9 million, or 1%, from the second quarter of 2006 primarily due to declines in electronic component sales, partially offset by higher automotive component demand. Segment operating earnings decreased $2.9 million from second quarter 2006 earnings primarily due to less favorable product mix, operational inefficiencies due to the start-up of the Czech Republic facility, and higher operating expenses including incremental legal and accounting fees and severance costs. Second quarter 2006 included a $0.3 million gain on sale of assets.

Components and sensors sales increased $1.2 million, or 2%, from the first quarter of 2007 reflecting increased demand primarily for electronic component infrastructure applications. Segment operating earnings increased $0.6 million from the first quarter primarily from increased volume and lower compensation costs, partially offset by incremental legal and accounting fees.

EMS: EMS sales increased $4.6 million, or 5%, from the second quarter of 2006 driven primarily by higher sales into the defense and aerospace and industrial markets, partially offset by lower demand in the computer market. Segment operating earnings increased $1.8 million from the second quarter of 2006 primarily due to higher volumes and more favorable product mix, partially offset by incremental legal and accounting fees.

Compared to the first quarter of 2007, EMS segment sales increased $5.1 million, or 5%. Total segment operating earnings increased $2.4 million primarily from the impact of higher volumes and more favorable product mix, partially reduced by incremental legal and accounting fees.

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