Ladies and gentlemen, thank you for standing by. Welcome to the CTS Corporation Q1 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions being given at that time. (Operator Instructions) And as a reminder, this conference is being recorded. I would now like to turn the conference over to Director of Investor Relations, Mitch Walorski. Please go ahead.

Thank you, John. I'm Mitch Walorski, Director of Investor Relations, and I will host the CTS Corporation first quarter 2013 earnings conference call. Thank you for joining us today. Participating from the company today are Kieran O’Sullivan, President and Chief Executive Officer; and Tom Kroll, Vice President and Chief Financial Officer. Before beginning the business discussions, I would to remind our listeners that the conference call contains forward-looking statements. These statements are subject to number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information regarding these risks and uncertainties were set forth in last evening’s press release and more information can be found in the Company’s SEC filings. To the extent that today's discussion refers to any non-GAAP measures relative to Regulation G, the required explanations and reconciliation are available on our website in the Investor Relations section. I will now turn the discussion over to Kieran.

Thanks Mitch. Good morning everyone and welcome. Last evening we released our first quarter financial results. Sales were $149.5 million, 2% higher than the first quarter of 2012. While our total sales increased very modestly, we were very pleased with our mass growth in the component and sensor segment, a 28% year-over-year increase. This was offset by a 27% of timed in EMS sales reflecting soft economic conditions especially in defense markets. Also our decision to close 2 EMS locations last year impacted our EMS revenues. New products in the automotive sensors and electronic components combined with our acquisition of D&R Technology, helps drive sales higher year-over-year. The integration of D&R is progressing on schedule and we are very pleased with the opportunities this new team brings to CTS in highly engineered automotive sensors for safety and chassis management applications. We are also pleased with our improvement in gross margin driven by our components and sensor sales. The increased production rate of our smart actuator product was realized in the first quarter. Piezoceramic components for disk drive applications, our other significant new products continues to contribute to solid year-over-year growth, as a large percentage of disk drives in the market are being switched to dual-stage actuation. Our components and sensor segment sales in the first quarter were $98.1 million up 28.3% year-over-year. Within the segment, automotive sensor sales of $65.2 million in the first quarter were up 36.4% year-over-year despite continued weakness in Europe and to a lesser extent, the impact of the Japan and China island dispute. Please note that the first quarter 2013 global automotive production of light vehicles declined 1.4% year-over-year, including in North America which was down 0.7%, Europe which was down 8.7%, and Asia was up 2.9%. Continuing with our components and sensor segment, electronic…

First, the Components and Sensors segment sales mix grew to 56% of total sales in the first quarter of 2013 versus 52% in the first quarter of 2012. This segment sales mix shipped had a positive impact on gross margins of approximately 2.5 percentage points. Secondly, within the EMS business segment gross margins improved due to the 2012 restructuring action and other ongoing cost containment action. Finally, the first quarter 2012 included incremental Thailand flood related expenses which obviously lowered the margins. Our selling, general and administrative expenses were $21.4 million versus $19.4 million last year. The increase from last year was primarily due to the incremental SG&A from the R&D acquisition including $1 million of higher amortization expense related to the purchase price. Please note that the D&R purchase price amortization is expected to decrease by approximately $400,000 to about $0.6 million in each of the remaining quarter’s this year. The first quarter 2013 R&D expenses were $6.3 million, up slightly from the $6.1 million last year. As a percentage of components and sensor segment sales, the R&D was 6.4% in the first quarter 2013 compared to 8% in the same period last year reflecting the increase in the segment sales. The restructuring and related charges were $822,000 in the first quarter 2013, thus completing the restructuring plan initiated in the fourth quarter 2012 and it does include the final cost for the closure of our EMS operations in China. Of this $822,000 amount, $559,000 is reflected on the restructuring line on the P&L and the remaining $264,000 is included in cost of goods sold. Our first quarter 2013 interest, currency and other expenses were $0.2 million unfavorable compared to last year by about $0.6 million due to increased interest expense on a higher debt level and less favorable…

(Operator Instructions) And we do have a question from the line of John Franzreb from Sidoti & Company. Your line is open. John E. Franzreb – Sidoti & Company: Kieran, Tom, how you’re doing?

Yes. Thank you.

Good morning. John E. Franzreb – Sidoti & Company: Actually I want to start off with actually EMS side of the business. The sequential drop in revenues, you kind of highlighted exiting the businesses in the aerospace and defense. Should we kind of reset what we think the revenue profile of this business is at this lower level or you expect to catch perfect in order for you to hit that that revenue target you have for the full year?

Yeah, I would say there is few points to consider here. First of all, we expect continued headwinds on the top line and the first half of the year with improvement in the second half. Just a few other points to go with that would be we’ve lowered the breakeven point of the business, but our actions that were taken some $5 million. We’ve got cost controls, management of the usual things in place and what we’re working to do is to get it back to the traditional earnings levels by fourth quarter of this year. So it’s pretty challenging at the moment, but we’re working our way through it. John E. Franzreb – Sidoti & Company: Okay. And the gross margin profile for the company, is it fair to assume that the new product introductions are having the biggest impact they’re caring or is it something else that’s driving it?

I think Tom can comment as well here, but overall I think you’ve seen the components and sensors where we have the better margin mix. And obviously new products are helping that. I think we are very clear in the last call as well that as we ramp with some of the new products we have margin improvements to do and they are being worked as we speak and improving but more work to do.

And I really don’t have anything to add to that. John E. Franzreb – Sidoti & Company: Okay. And is it fair to assume you have highlighted the $54 million in new product wins, would the gross margin profile of those new wins be above the corporate average?

We see in line with components and sensors. John E. Franzreb – Sidoti & Company: Okay. And one last question, the R&D number was up rather substantially. Tom you highlighted the SG&A reflecting the D&R acquisition but you did not call up the same for the R&D, what’s going on with the R&D line?

Well the R&D it was up about $150,000 and that relative to last year and that does reflect some D&R spending also. John E. Franzreb – Sidoti & Company: Okay, is there anything else that we should cognizant off, is your trend in the same levels or was that similar to last year or is it going to drift down again?

John, I think you can expect that level for pretty much the rest of the year. So it a little bit higher than last year, but again it does include the D&R portion. And also in Q4, you may remember we highlighted several NRE reimbursements that we did not see in Q1, 2013. But from a trending standpoint the 6.3 run rate is pretty good. John E. Franzreb – Sidoti & Company: Okay. I will get back to you guys. Thank you.

We will now go to the line of Hendi Susanto from Gabelli. Please go ahead. Hendi Susanto – Gabelli & Company, Inc.: Good morning. Kieran O’Sullivan: Good morning Hendi.

Good morning. Hendi Susanto – Gabelli & Company, Inc.: Yes, first question, what are your implied revenue growth rates for EMS and components and sensors for 2013 now? Kieran O’Sullivan: EMS, let me start first of all with components and sensors, and we’ve been tracking around…

28% - 30%. Kieran O’Sullivan: 28% - 30%. Hendi Susanto – Gabelli & Company, Inc.: Okay.

And Hendi just a comment on the EMS side, as we had mentioned in the January conference call, at that time we didn’t expect EMS to grow relative to 2013 and based on Kieran’s comments, we now realize we will be below 2012. Hendi Susanto – Gabelli & Company, Inc.: Okay. And then when you said below, anymore clarifications, whether it’s like single digit or double digit?

It’s probably going to be in that high single digit range. Hendi Susanto – Gabelli & Company, Inc.: Okay. And then… Kieran O’Sullivan: That’s something Hendi as you know we really did not guide on. Hendi Susanto – Gabelli & Company, Inc.: Okay, yeah, sure. Kieran, would you remind us what the composition of EMS surface is in terms of end markets and I would like to hear your insight also on EMS sales in medical and communication in the first quarter? Kieran O’Sullivan: So the exact foresight in terms of percentages, Hendi, I don’t have in front of me. But the bigger parts are industrial and the communication side of it has been pretty strong and medical, smaller but growing and defense obviously is the one we were hurting quite a bit at the moment but if you look at it, I would say industrial about 36%, defense 25%, but hurting in that area, communication is 28% and medical 11%. Hendi Susanto – Gabelli & Company, Inc.: Okay. And then you mentioned that CTS will explore potential sales or sell lease of our real estate, could you share how much real estate as such that potentially can be leased or sold?

Okay, you are referring back to the – when you talk about selling the company’s assets, buildings that we may have exited due to the closure of facilities correct? Hendi Susanto – Gabelli & Company, Inc.: Yes.

Yes, so I mean, we’re – it’s still in work in progress. To be very honest with you, I put it on at the target for myself and for the team here we’ve got your 4 or 5 assets out there that I’d like to move on. Given the current climate out there I would be real optimistic if we could secure some progress on two this year. Hendi Susanto – Gabelli & Company, Inc.: Two, okay. And then you had smart actuator sales of $7.3 million in Q1 and you have a target of $20 million for the year. So what does sales of smart actuator may look like in Q2, Q3 and Q4. Basically I would like to look at whether you’re still keeping that $20 million target or we potentially may see up sight as well?

Yeah, you’re probably factoring in a little up sight there but also remember we got some softness in EMS. So a few things happening number one, the run rate would imply 28, we really don’t see 28, we see something in the range of 22 to 24 and just look at comments at the earning report, they had some softness. We already believe we factored that in pretty well, so about the 20, run 22 plus little bit is where we would see it. Hendi Susanto – Gabelli & Company, Inc.: Okay yes, and D&R sales was higher than my expectation, it was at $12.7 million, considering the D&R had like $15 million annual run rate, do you see some upside as well considering that you have cross sell opportunities?

No, it’s on track exactly where we expected it to be. Hendi Susanto – Gabelli & Company, Inc.: On track, okay. So you’re still expecting $15 million for the year?

Absolutely. Hendi Susanto – Gabelli & Company, Inc.: Yeah. And then Tom, you mentioned that effective tax rate will be 25% for 2013.

Yes. Hendi Susanto – Gabelli & Company, Inc.: How should we model tax rate for the rest of 2013?

I think Hendi at that rate it will be level essentially for Q2 through Q4. Hendi Susanto – Gabelli & Company, Inc.: Like 25% from Q2 to Q4?

Yes. Hendi Susanto – Gabelli & Company, Inc.: Okay, got it.

And Hendi, the thing I will just point out, you have to remember that the Q1 tax rate was 25% roughly, but it did include that one-time $1.6 million benefit that I talked about, so you have to factor that into. Hendi Susanto – Gabelli & Company, Inc.: Okay, got it. Yeah, thank you. Let me go back to the line. Thank you.

Thank you.

(Operator Instructions) And we will go back to the line of Hendi Susanto with Gabelli. Your line is open. Hendi Susanto – Gabelli & Company, Inc.: Yes. Kieran, I would like to request like further clarification on the press release when it said that like, you would like to work to simplify business and then optimize capital utilization?

Yes, so two things there. As I am immersing myself in each of the locations and the businesses, different parts of the business play in different markets and that drives different products and services. So in some areas we’re a mix of products and some areas with service and how we align, so I am trying to simplify that and see what the right identity is for us going forward and so that’s a question. On the second part of your question when it comes to assets utilization, I think I said in my comments that you’d get more details in 60 days to 90 days, but just to be very clear as I look at the global footprint, I believe we can optimize it and you will be getting some details from me on that. Hendi Susanto – Gabelli & Company, Inc.: Okay, thank you.

All right. And now we will go to the line of Paul Szczygiel from Columbia Management. Your line is open. Paul S. Szczygiel – Columbia Management Investment Advisers LLC: Hey guys, what gives you confidence that the second half revenues will be better for EMS than the first half? Is it in the backlog or in the pipeline or?

You know it’s a pretty dynamic business overall. I would say Paul, when I look at this business there are two things that really drive the business. One is the strength of management’s relationships and the sales team’s relationship with the customers and secondly internally driving that operational excellence, cadence right across the organizations. Those are two things that make that industry move. And what we’ve been doing is strengthening that inter phase with the customer, we have more work to do there, we have got a good pipeline, but I am looking to make sure we get some good prove points that I need as well. Paul S. Szczygiel – Columbia Management Investment Advisers LLC: Thank you.

(Operator Instructions) And nothing more from the phone lines.

All right. I would like to remind our listeners that a replay of the conference call will be available from 1:30 p.m. Eastern Daylight time today through 11:59 p.m. on Wednesday, May 1, 2013. The telephone number for the replay is 800-475-6701 or 320-365-3844, if calling from outside the U.S., the access code is 288166. Thank you for joining us today.

And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and using AT&T Executive Teleconference. You may now disconnect.