January 27, 2010

FOR RELEASE:  Immediately

 CTS ANNOUNCES FOURTH QUARTER AND FULL-YEAR
2009 FINANCIAL RESULTS

 Reports Strong Cash Flow and Sequential Improvement in Sales and Operating Earnings
Adjusted Earnings Exceed Analyst Estimate
 

Elkhart, IN…CTS Corporation (NYSE: CTS) today announced fourth quarter 2009 revenues of $133.9 million, 6% higher than third quarter 2009 revenues of $126.6 million. Fourth quarter 2009 net earnings were $4.1 million, or $0.12 per diluted share, including a discrete tax valuation allowance charge of $2.5 million (or $0.07 per diluted share). Excluding this charge, fourth quarter non-GAAP adjusted net earnings were $6.6 million, or $0.19 per diluted share, compared to third quarter 2009 net earnings of $4.5 million, or $0.13 per diluted share.

Components and Sensors segment revenues increased 17% from the third quarter of 2009, driven by a 24% improvement in automotive product shipments with improved market share, as the global markets began to recover.  Sales of electronic component products increased 5% over the third quarter of 2009 primarily from higher demand for wireless infrastructure applications. EMS segment sales decreased 3% from the third quarter of 2009 primarily due to lower sales in the defense and aerospace market.  Components and Sensors segment sales were 49% of total CTS sales in the fourth quarter, compared to 44% in the third quarter, contributing to the sequential earnings improvement.

Although total sales in the fourth quarter 2009 decreased 18% from the same period last year, sales in automotive sensors and actuators increased 44%, reflecting the global market recovery for light vehicles. Adjusted fourth quarter 2009 diluted earnings per share of $0.19 increased 36% over the fourth quarter 2008.

Full-year 2009 revenue was $499.0 million, a 28% decrease from 2008 full-year revenue, reflecting the impact of the global recession. The Company implemented a number of cost saving actions in late 2008 and 2009 to manage through the negative economic environment, finishing the year with three consecutive sequential quarter-to-quarter improvements in both sales and operating earnings.  Fourth quarter 2009 cash flow from operations was $12.5 million driving full-year cash flow from operations to $46.6 million, which is significantly improved from $34.1 million for full-year 2008.  Full-year capital expenditures were $6.5 million, compared to $17.6 million in 2008.  Total debt, as a percentage of total capitalization, was 17.0% at year-end 2009, compared to 22.4% at year-end 2008.

Commenting on fourth quarter 2009 results, Vinod M. Khilnani, CTS Chairman and Chief Executive Officer, stated, “We are pleased to continue the momentum established earlier this year through our growth and cost structure initiatives. The Company continued generating strong cash flow and improving operating profitability. CTS ended the year further diversifying its geographic customer base by winning strategic new business in key Asian markets. CTS achieved a record of winning over $300 million of new business across all our key product lines and continued to capture design wins for electronic component products.”

The full-year 2009 net loss of $34.1 million, or $1.01 per share, included four non-operating discrete items: a non-cash charge for goodwill impairment of $33.2 million, or $0.98 per diluted share, restructuring charges of $2.2 million, or $0.05, an international cash repatriation-related tax charge, primarily non-cash, of $9.1 million, or $0.27 per diluted share, and a discrete tax valuation charge of $2.5 million, or $0.07 per diluted share. Full-year net earnings in 2008 was $28.1 million, or $0.81 per diluted share. Included in 2008 results were two non-operating discrete items: a favorable net tax credit of $0.14 per share and a negative $0.10 per share impact from restructuring and related costs.  Excluding these non-operating items, adjusted earnings per share in 2009 were $0.36, compared to adjusted earnings per share in 2008 of $0.77.

Based on an easing of the current recession, yet taking a cautious view of the economic indicators in 2010, management anticipates full-year 2010 sales to increase in the range of 10% to 15% over 2009 and diluted earnings per share to be in the range of $0.45 to $0.53. This estimate includes reinstatement of certain temporary salary and benefit reductions in 2009, and increase in the research and development activities to support new product introductions, including the launch of sensor and actuator products for diesel and commercial market applications. First quarter results are expected to show normal seasonality with gradual improvements during the year.
 

SEGMENT INFORMATION

(Dollars in millions)                                                                                      

Components & Sensors: Components and Sensors fourth quarter 2009 sales increased $9.6 million, or 17%, from the third quarter of 2009 reflecting a 24% increase in global automotive sensor product demand. Electronic component product demand increased 5% primarily in sales of infrastructure applications. Segment operating earnings increased $3.5 million from the third quarter, driven primarily by higher sales volume and improved margins.

Components and Sensors fourth quarter 2009 sales increased $7.5 million, or 13%, from the fourth quarter of 2008.  Automotive sensor and actuator product sales improved by $13.6 million, or 44%, partially offset by 23% lower sales of electronic component products.  Segment operating earnings of $7.6 million were favorable by $5.7 million to the fourth quarter of 2008 due to higher sales volumes and cost control initiatives.
 

EMS: EMS fourth quarter 2009 sales declined $2.3 million, or 3%, from third quarter 2009 levels, primarily reflecting lower demand in the defense and aerospace market.  Segment operating earnings of $0.7 million decreased $1.5 million from the third quarter 2009, primarily due to unfavorable product mix and lower sales.

EMS fourth quarter 2009 sales decreased $36.4 million, or 35%, from the fourth quarter of 2008 reflecting lower sales across all markets from the global recession. Segment operating earnings decreased $3.3 million from the fourth quarter of 2008 on lower volumes, partially offset by reduced operating expenses.
 

Conference Call
As previously announced, the Company has scheduled a conference call on Thursday, January 28, 2010 at 11:00 a.m. EST. Those interested in participating may dial 800-288-8960 (612-332-0107, 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. EST on Thursday, January 28, 2010, through 11:59 p.m. EST on Thursday, February 4, 2010. The telephone number for the replay is 800-475-6701 (320-365-3844, if calling from outside the U.S.). The access code is 142812. 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, communications, medical, defense and aerospace, industrial and computer 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 and are based on various assumptions as to future events, the occurrence of which necessarily are subject to uncertainties. 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: changes in the economy generally and in respect to the businesses in which CTS operates, including those resulting from the current global financial and credit crisis; pricing pressures and reduction in demand for CTS’ products, especially if economic conditions do not recover or continue to worsen in CTS’ served markets, including but not limited to: the automotive, computer equipment or communications markets; disruption, uncertainty or volatility in the credit markets that could adversely impact the availability of credit already arranged by CTS and the availability and cost of credit in the future; the financial condition of our customers, including the ability of customers (especially those that may be highly leveraged and those with inadequate liquidity) to maintain their credit availability or ongoing viability; risks associated with CTS’ international operations, including trade and tariff barriers; currency fluctuations and their effects on our results of operations and financial position; changes in performance of equity and debt markets that could affect the valuation of the assets in CTS’ pension plans and the accounting for pension assets, liabilities and expenses; political and geopolitical risks; rapid technological change in the automotive, communications and computer industries; reliance on key customers; and CTS’ ability to protect its intellectual property. 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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