CTS Corporation Announces Operational Restructuring and 2001 Outlook

    ELKHART, Ind.--May 23, 2001--CTS Corporation announced today that it had adopted a plan to realign its operations.
    This action will position CTS as a leading cost effective electronic components and assemblies producer and will allow it to leverage the improvements when the market demand recovers. The plan involves the consolidation of plants, writedowns of inventory and other assets and headcount and other cost reduction actions. The plan will result in an estimated $25 million pretax restructuring charge and related one-time costs, about 40% of which will be non-cash charges. This charge is in addition to the $2 million one-time pretax charge recorded in the first quarter. A charge of $19 million will be taken this quarter, and the balance will be recorded as incurred over the next four to five quarters.
    "We reported last month that we were reviewing our operations with the objective of significantly reducing our breakeven point in light of current market conditions," said Joseph P. Walker, chairman and chief executive officer. "These actions will permit the Company to operate much more efficiently in the current environment and at the same time be well positioned when the economy begins to improve. While these actions will be extremely beneficial to our future, we regret the impact they will have on some employees and CTS will take actions to ease the transition for those affected," Walker said.

    The restructuring charge includes:

--	$8 million relating to facility consolidations involving facilities in Asia, North America and Europe, and will include plant closures and product consolidations; and
--	A $6 million asset impairment charge to discontinue the manufacture of intermediate frequency surface acoustical wave filters.

    Related one-time costs of $11 million include:

    -- $5 million of inventory write-offs, principally relating to
    intermediate frequency surface acoustical wave filters; and

    -- $6 million of other one-time charges for equipment relocation,
    employee and other costs.

    When completed, the manufacturing consolidations and other actions described above are expected to reduce CTS' breakeven volume by $55 million, when compared to the year 2000 sales volume and cost structure. These actions, including those initiated in the first quarter, are expected to generate approximately $25 million annually in improved profitability.
    "Our plan is to have these actions well along by the end of this year and largely completed by mid-2002," said Donald K. Schwanz, CTS' president and chief operating officer. "About $10 million in benefits will be realized yet this year. By 2002, we expect about $20 million in benefits with the full annual savings of $25 million expected in 2003. Of the $10 million in benefits expected to be realized this year, about $4 million derives from non-volume related headcount reductions undertaken in the first quarter. With the exception of IF SAW filters, where we are exiting production, our capacity will actually increase," Schwanz said.
    "The economy and the markets in which CTS participates have not yet demonstrated the signs of a recovery expected earlier this year," Walker said. "While we expected our customers' inventory adjustments to generally balance out during the course of the second quarter, this has not fully occurred. As a result, at our current revenue levels, our second quarter earnings are expected to be in the same range, or slightly lower, than they were for the first quarter of this year. For the balance of the year, we presently expect earnings before restructuring or other one-time charges to be in a range of $1.25 to $1.55 per share," Walker concluded.