Presentation January 2016 Safe Harbor Statement This presentation - PowerPoint PPT Presentation

Investor Presentation January 2016

Safe Harbor Statement This presentation 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. Forward-looking statements are based on management's expectations, certain assumptions and currently available information. 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. Examples of factors that may affect future operating results and financial condition include, but are not limited to: changes in the economy generally and in respect to the businesses in which CTS operates; unanticipated issues in integrating acquisitions; the results of actions to reposition our businesses; rapid technological change; general market conditions in the automotive, communications, and computer industries, as well as conditions in the industrial, defense and aerospace, and medical markets; reliance on key customers; unanticipated natural disasters or other events; the ability to protect our intellectual property; pricing pressures and demand for our products; unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters as well as any product liability claims; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political and geopolitical risks. Many of these, and other, risks and uncertainties are discussed in further detail in Item 1A. of the Annual Report on Form 10-K. We undertake no obligation to publicly update our forward- looking statements to reflect new information or events or circumstances that arise after the date hereof, including market or industry changes. 2

Our Company Tick icker: : CTS (NYSE) 2014 Sales les: $404 Million Fou ounded: 1896 Sales les by Market:  Transportation – 67%  Bu Busin ines ess: CTS is a leading designer Industrial – 14%  and manufacturer of sensors, Information Technology – 6%  actuators and electronic components. Defense / Aerospace – 4%  Medical – 3%  Locations: Loc : 11 manufacturing locations Communications – 3% throughout North America, Asia and Other – 3% Europe. Sales les by Reg egion:  Number of of Employees: ~3,000 Americas – 54%  Globally Asia – 33%  Europe – 13% Note: Sales by market and region based on trailing twelve months sales (Q4 2014 through Q3 2015) 3

Our History - 120 Years of Innovation 4

Our New Identity Our r Purpo rpose: CTS has been part of the future for We’re here to enable an intelligent and 120 years. As technology has seamless world. continued to move forward, we’ve been right alongside, engineering Our r Vis isio ion: intelligent ways to meet people’s ever We aim to be a leading provider of changing needs. sensing and motion devices as well as connectivity components, enabling an Today is no different and we continue intelligent and seamless world. to reinvent ourselves by establishing a Our r Promise: new identity. New visuals and Your Partner in Smart Solutions graphics are representative of our renewed purpose, vision, promise Our r Valu lue Prop opositi tion: and value proposition. Sense. Connect. Move. To learn more, visit www.ctscorp.com 5

Our Customers Ind. nd. / / De Defense Medic Med ical Tran anspor ortation Oth Other New Ne European OEM OE Co Communic icatio ions Distrib Di ibutio ion Ind ndustria ial / / IT Ind ndustria ial l / / IT Tran anspor ortatio ion 6

Our Products Sens Sensors Swi witches & & Co Controls ls Accele Ac lerator or Ped edals ls EM EMI/R /RFI Fi Filters RF RF Fi Filters Timin Timing Co Comp mponents Micr Micro o Ac Actuator ors Smart Ac Sm Actuator ors Tor orque Mo Motor Ac Actuator 7

Diversify End Markets Targeted End Markets AD Light Vehicles 30-50% Industrial 20-30% C/IT LV Medical 10-20% Commercial Vehicles 10-20% CV Comm./IT 10-20% Aviation/Defense 5-15% M O M I LV/CV DA C I AD C/IT Organic Growth CV Innovation M&A M LV EMS Divestiture M IT/O AD I Front End Refocus C Legend: AD: Aviation/Defense I C: Communications LV/CV New Customers CV: Commercial Vehicles I: Industrial Regional Expansion IT: Information Technology Organic Projects LV: Light Vehicles M&A M: Medical O: Others 8

Organic Growth - Focusing on Our Value Proposition Develop next generation Low power OCXO Leverage current sensor products competencies to expand RF monoblock modules and actuator portfolio Expanded pedal ClearPlex Waveguide applications technology for telecom and Expanded piezo-ceramic military markets applications and new Expanded switch and technologies: control product line Broaden portfolio of  Naval sonar buoys distribution products  Industrial ultrasonic welding Expanded piezo-ceramic applications and new technologies:  Naval sonar buoys  Naval hydrophones  Miniature medical ultrasound New Products, New Appli lications, New Customers 9

Inorganic Growth - Targeted Acquisitions Str trength then Expand Exp Enhance e Broaden Br en Customer Cu Product Tech echnology Geo eographic Rela elati tionships Range Por ortfolio Rea each Discip Di iplin ined ap approach to acq acquis isit itions: s:  Returns in excess of cost of capital  Accretive to earnings  Maintain balance sheet strength  Synergy opportunities 10

Filter Sensing Technologies (FST) Acquisition FST Overview RF Sensing – DPF/GPF Benefits   Start-up founded by two MIT Ph. D. Highly accurate direct measurement of graduates located in the Boston area both soot and ash in DPF/GPF   Innovative sensing technology that uses a Optimize DPF/GPF to improve efficiency low power RF signal to measure soot and and reduce ash maintenance ash loading on Diesel Particulate Filters  Reduce fuel consumption by optimizing (DPF) or Gasoline Particulate Filters (GPF) particulate filter regeneration  Suitable for aftertreatment systems in  Enable aftertreatment system cost Passenger or Commercial Vehicles, diesel reduction or gasoline.  Potential to integrate on-board diagnostics Acquisition Rationale function while providing significant value  add Disruptive sensing technology with potential to become a sensing platform  Extended filter component life and reduce  warranty claims Entry point into aftertreatment applications in Transportation applications  Potential applications outside transportation  Leverages CTS core capabilities 11

Annual Financial Performance Trend ($ Millions except Adjusted Earnings Per Share) Sales Adjusted Earnings Per Share $1.05 $405 -2% to +8% -3% to 0% $0.97 97 $0.95 $409 $404 $390 $0.82 82 $305 $280 $0.67 67 $0.64 64 2011 2012 2013 2014 2015E 2011 2011 2012 2012 2013 2013 2014 2014 2015E 2015E Note 1: Sales are from continuing operations. Adjusted EPS is as reported. Note 2: 2015E represents guidance provided on October 27, 2015. 12

New Business Awards ($ Millions) $484 $299 $455 2Q-4Q 3Q YTD Not 1Q Not Reported Reported 2012 2013 2014 2015 13

Improved Cost Structure  Manufacturing locations Reduced from 15 to 11  Utilization of best cost manufacturing locations up from ~50% in 2013  to >80% by 2017 – ~65% in 2014  Shift SG&A spend – Increase Sales & Marketing, Optimize G&A Improve presence in Europe and Asia  Increase customer intimacy  Lean corporate office  G&A best cost optimization   Continue to fund R&D for growth Closer to customer  Best cost optimization  14

Capital Structure ($ Millions except percentages) Current Capital Structure Total Debt to Capitalization $151 $135 $124 Equity 77% $91 $75 $75 Bank Debt 23% ($200 $200M Fac acility) 2013 2014 Q3 2015 Ca Cash Debt Net $(49) $(60) $(60) De Debt Str trong Bala alance Sheet an and Con onserv rvativ ive Cap apit ital l Str tructure 15

Target Capital Deployment – Disciplined Approach Operatin ing Cash ash Flo Flow 12-14 12 14% of of Sal Sales Return Cap apit ital to o Gr Growth Sh Sharehold lders Investment Acquisit Ac itio ions Divid idends & & Bu Buyba ybacks 60 60-80% % of of ~4% ~4 % of of Sale Sales Fr Free Cash Cash Fl Flow 20-40% 20 % of of Fr Free Cash Cash Fl Flow Capital Ca l Stru tructure Leverage = Le = 1.0x 1.0x - 2.5x 2.5x EBI EBITDA 16

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