CTS Confirms Additional Profit Improvement Actions; Restructuring Charges Planned in Third Quarter; Annual Pretax Savings of $11 Million Expected.

Business Editors

ELKHART, Ind.--(BUSINESS WIRE)--Aug. 16, 2002

CTS Corporation (NYSE:CTS) today confirmed that it is proceeding with the cost reduction and restructuring plan first announced August 13, 2002.

Total restructuring charges associated with these actions are expected to be in the range of $15-$17 million pretax, all of which are planned to be taken in the third quarter. Of this amount, approximately $2 million is a cash charge, primarily for severance expenses, and the remaining $13-$15 million is a non-cash charge, primarily related to the write-down of certain manufacturing equipment. The resulting net cash impact in 2002 is expected to be positive. CTS anticipates about $11 million in annualized pretax savings from these actions. Approximately $2.5 million in savings will be realized in 2002, primarily from the headcount reductions.

Operational improvements and related organizational realignments in the Communications Components operations have allowed the elimination of approximately 140 indirect and salaried positions in SG&A, R&D and manufacturing overhead, most of which will be completed during the third quarter. These reductions are part of the Company's ongoing initiatives to dramatically reduce its cost structure and restore profitability.

Additionally, CTS confirmed its intent to stop the design of new custom variations of certain product lines within its Communications Components operations. Product lines included are the older 9x11mm and 5x7mm Temperature Compensated Crystal Oscillators and Voltage Controlled Oscillators. CTS will continue to manufacture existing designs of these products to satisfy current customer needs and will work with those customers to ensure no adverse impact on their operations. "Demand for these product lines has been declining and margins on the products no longer justify the investment of Company resources," said Donald Schwanz, CTS Chairman and Chief Executive Officer. As a result, CTS will reduce its engineering, sales and administrative support to these product lines by the additional elimination of approximately 20 positions while refocusing others on more profitable product lines.

"The operational consolidation and reorganization initiatives begun last year in our Communications Components operations laid the foundation for further process improvements, operational streamlining and efficiencies. These structural cost reductions, along with aggressive product cost reduction initiatives, are anticipated to drive continued profit improvement over the next several quarters and contribute to the Company's expected return to profitable operation by the end of this year," added Schwanz.

General Comments:

-- Sales volumes for those product lines being de-emphasized are anticipated to be approximately $20 million in 2002 and are expected to phase out by 2004. Operating margins on these product lines are currently negative.

-- Total headcount reductions are estimated to be about 160 with approximately 40% of these related to manufacturing overhead positions and the remainder related to SG&A and R&D positions.

Statements about the Company's earnings outlook and its plans, estimates and beliefs concerning the future are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, based on the Company's current expectations. Actual results may differ materially from those stated in the forward-looking statements due to a variety of factors which could affect the Company's operating results, liquidity and financial condition. We undertake no obligations to publicly update or revise any forward-looking statements. Factors that could impact future results include among others: the general market conditions in the communications, computer and automotive markets, and in the overall economy; whether the Company is able to implement measures to improve its financial condition and flexibility; the Company's successful execution of its restructurings, consolidation and cost-reduction plans; pricing pressures and demand for the Company's products, especially if economic conditions worsen or do not recover in the key markets for the Company's products; and risks associated with our international operations, including trade and tariff barriers, exchange rates and political risks. Investors are encouraged to examine the Company's SEC filings, which more fully describe the risks and uncertainties associated with the Company's business.

CTS Corporation is a leading designer and manufacturer of electronic components and assemblies for the communications, computer and automotive markets. The Company manufactures products in North America, Europe and Asia. Worldwide sales coverage is accomplished through a network of direct sales personnel, independent manufacturers' representatives and electronic distributors. The Company's stock is traded on the NYSE under the ticker symbol "CTS." To find out more, visit the Company's website at www.ctscorp.com.