Ladies and gentlemen, thank you for standing by and welcome to the CTS Third Quarter Earnings Call. At this time, all lines are in a listen-only mode. Later, there will an opportunity for your questions and instructions will be given at that time. (Operator Instructions) And as a reminder, this conference is being recorded. I’ll now turn the conference over to your host, Tom Kroll. Please go ahead, sir.

Thank you, Cathy and thank you for joking us this morning. My name is Tom Kroll; I am the CFO of CTS. And joining me today is Kieran O’Sullivan, our Chief Executive Officer. Before beginning the business discussion, I would like to remind our listeners that the conference call contains forward-looking statements. These statements are subject to a 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 was 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 reconciliations are available on our website in the Investor Relations section. I will now turn the discussion over to our CEO, Kieran O'Sullivan. Kieran M. O’Sullivan: Thanks, Tom, good morning and thank you for joining us today. Last evening we've reported third quarter sales of $159.6 million, an increase of 5.3% from the prior quarter; and then increase of 16.2% from the same period last year. Third quarter net earnings increased 18% to $0.20 per share from $0.17 per share in the same period last year on a GAAP basis. Non-GAAP net earnings were $0.24 per share compared to $0.20 per share in the same period last year and $0.20 per share in the second quarter of 2013. As I share our results for the quarter, I want to reiterate the priorities that I shared with you in the last two quarters and they remain unchanged. It’s a strong focus on building leadership strength globally, to complete strategic analysis of our business with an emphasis of simplification of the business model, focused on margins, operating expenses and…

Thank you, Kieran. As Kieran just mentioned, our third quarter 2013 sales were $159.6 million, an increase of $8 million from the prior quarter and an increase of $22.2 million from the prior year. Our gross margins were 23.5% versus 19.4% last year or a 4.1 percentage point improvement, primarily due to the component and sensor segment mix growing to 65% of total sales in the third quarter of 2013 versus 55% in the third quarter of 2012. Our margins of 23.5% were similar to the gross margins of 23.4% in the second quarter 2013, despite higher EMS sales in Q3 versus Q2. Our selling, general, administrative expenses were $20.8 million versus $19.4 million last year. The increase from last year was primarily due to the D&R acquisition related amortization expense and CEO transition cost. The third quarter 2013 R&D expenses were $5.7 million, increasing from the $4.4 million last year and reflects our continued commitment to invest in our future. As a percentage of component and sensor segment sales, the R&D was 5.5% in the third quarter 2013, compared to 5.8% in the same period last year. The restructuring and related charges were $1.1 million in the third quarter 2013. Of this amount $1 million is reflected on the restructuring line on the P&L and the remaining $0.1 million is included in cost of good sold. These costs are part of our second quarter restructuring plan of $16 million to $20 million. This restructuring plan, when completed in mid-2014, is expected to generate $8 million to $ 10 million of annualized savings going forward. Our third quarter net interest currency and other income were $0.3 million or $0.3 million lower than last year. On a full year basis, we continue to expect our adjusted effective tax rate which excludes…

(Operator Instructions) Our first question is from John Franzreb with Sidoti & Company. Go ahead, please. John Franzreb – Sidoti & Company: Good morning, guys.

Good morning John. John Franzreb – Sidoti & Company: Kieran, if I heard you correctly, you said that the piezo product pipeline was soft in the quarter. But components and sensors on an organic legacy basis still had a very strong quarter. Could you talk about the pieces that offset the weakness in the HDD product line? Kieran M. O’Sullivan: Yes, maybe first just on the HDD side of it. We had some softness there related to the enterprise and desktop platforms and that will continue a little bit. But we expect that to fully come back as inventory levels are burned off and they transition into the newer platform, so not too concerned about that. Other things we had going on as we had some increases on the pedal business we had some increases especially with an Asian OEM that helped to spike several million. So they are probably some of the key points John. John Franzreb – Sidoti & Company: And how much was the automotive side first on a year-over-year basis versus a year ago? Kieran M. O’Sullivan: Marginally, from a quarter-over-quarter marginally up, and year-over-year, Tom, you have the number there?

Yes. Year-over-year for automotive, John, that’s about $72 million, but keep in mind that has almost $38 million or $37 million of D&R sales in it. John Franzreb – Sidoti & Company: All right, right, right. Do you have that number on a – okay, that’s fine. And Kieran, you mentioned that one of the keys which we should be focusing on, I guess notably to me was the gross margin. As a focus, what actions will you be taking to improve that gross margin profile in addition to what you’ve already announced? Kieran M. O’Sullivan: I think there were two or three components. That first think that you’re already aware of I think is historically we’ve talked about components and sensors as the high margin business and with the divestiture of EMS. You're going to see that profile changed to a much higher levels. Just as a means of management, it’s where you invest in the new products going forward and quite honestly over-spoken focusing on products in the portfolio in terms of driving margin improvement action. That’s a constant thing that we focus on. And not right down to the materials, to the operation, different parts that you control. John Franzreb – Sidoti & Company: Do you have an internal rate of return that you target the new product introductions that you want to more share with us? Kieran M. O’Sullivan: John, as a general rule, we want to exceed the 12% type of range. John Franzreb – Sidoti & Company: Okay, perfect. And Tom you mentioned in your remarks that the cash from the EMS divestiture we used to pay down debt, you can’t post quarter. So can you kind of – have you paid down the debt that can give us an update on what you expected that may be to finish the year-end and how much cash you expect to have?

Sure, John as we – the cash did come two days after we closed the quarter. And if you look at our cash that we had at the end of Q3, it was about $98 million like I said. The debt was about $128 million. We would expect to still generate some cash in Q4 during the normal course, but that debt would most likely come down from $130 million or so by that $75 million. John Franzreb – Sidoti & Company: Okay. Shipping the whole proceeds to paying down the debt? Kieran M. O’Sullivan: Yes, initially John, because we sweep then those right against our revolver. John Franzreb – Sidoti & Company: That’s fine. Okay. I’ll get back in the queue. Thank you, guys.

Thank you. And then we’ll go next to Hendi Susanto with Gabelli & Company. Go ahead please. Hendi Susanto – Gabelli & Company, Inc.: Good morning, Kieran and Tom. Kieran M. O’Sullivan: Good morning, Hendi. Hendi Susanto – Gabelli & Company, Inc.: Yes. So my first question is, with regard to the annual saving of restructuring of the $8 million to $10 million target, how much of that will be reinvested and how much of that will be freed? Kieran M. O’Sullivan: Well, we’ve guided already that for next year that savings coming in the second half from the restructuring is $8 million to $10 million and then I think what you can expect to see from an investment perspective is our R&D even historically has been around the Components and Sensors, very little on the EMS side. So you can expect it to continue in the 5% to 6% range on the R&D and nothing unusual to call it. Hendi Susanto – Gabelli & Company, Inc.: Okay, yes. And then, Tom, I think I may have missed this during the call. May I know how much of automotive sensor and actuator sales in the third quarter?

How much were the Components and Sensors sales? Hendi Susanto – Gabelli & Company, Inc.: The automotive sensors and actuators.

Through the quarter… Kieran M. O’Sullivan: Tom, high 60s. Hendi Susanto – Gabelli & Company, Inc.: High 60s?

As a percentage, I’m sorry, Hendi. Yes. Hendi Susanto – Gabelli & Company, Inc.: Okay, high 60s. So the electronic components is in the upper 30s? Kieran M. O’Sullivan: Yes, somewhere in that range. Hendi Susanto – Gabelli & Company, Inc.: Okay. So you don’t disclose the official number anymore? Kieran M. O’Sullivan: We can get it for you, not a problem, but it’s kind of a 65/35 mix, something like that. Hendi Susanto – Gabelli & Company, Inc.: I see. Okay. And then, Kieran, do you have any update on smart actuator, like what kind of annual run rate it is going at the moment? Kieran M. O’Sullivan: Yes. I think we mentioned on earlier calls that we’re running in the mid 20 range in sales and we also were very cared that we’re focused on driving the gross margins. That’s something that’s in constant focus. Hendi Susanto – Gabelli & Company, Inc.: Okay. Thank you. Let me get back to the queue.

Thank you. Then we’ll go next to Jim McAree with Neuberger Berman. Go ahead please. Jim Francis McAree – Neuberger Berman LLC: Hey, good morning gentleman. Just two questions. Kieran, I just want to make sure I understood on the strategic repositioning that you’ve done. You’ve divested EMS. Are there any further updates that we should be thinking about in that regard? It sounded like the progress may still be continuing? Kieran M. O’Sullivan: No. I would say very clearly with the divestiture of EMS we’re back focused on the core and obviously as part of looking to the future we’re optimizing always the products in the portfolio, but we’re back to the core essentially. Jim Francis McAree – Neuberger Berman LLC: Okay, very good. And then, maybe is there the renewed focus on CNS and particularly in R&D? Is there anything that you can describe to us in terms of the target of the R&D spend, where there projects that didn’t get funded in the past because the corporate constrains or are there new things that you’re exploring with fresh dollars? Kieran M. O’Sullivan: I would tell you that some examples that we called at this morning were the first half pedals the ClearPlex technology, some of what – the things we’re building off in piezo. So there is a number of things that are continuing, but also I would tell you that you don’t expect the R&D profile to change, but do expect this to continue to adapt and be very focused in terms of where we will invest even building some of the skill sets from things we have done is bringing in some mechatronic capability and skill sets in that area, but nothing to spell out today. Jim Francis McAree – Neuberger Berman LLC: Right, thank you for the update.

You are welcome.

Thank you. (Operator Instructions) We have a follow-up from John Franzreb with Sidoti & Company. Go ahead, please. John E. Franzreb – Sidoti & Co. LLC: Kieran, I haven’t heard much about an appetite for acquisition, it seems like you have lot of the growth that you are looking for is going to be internally driven, am I perceiving that properly? Kieran M. O’Sullivan: We are going to look at both organic and inorganic investments and so you can expect to hear more of that going forward. We talked in the press release about bolt-on acquisitions and adjacent technologies and yes, it’s possible we consider geographic regions that we could leverage our capabilities with as well. John E. Franzreb – Sidoti & Co. LLC: Could you put a framework about the size of the acquisitions looking at a – well, could you put a framework around that? Kieran M. O’Sullivan: I don’t want at the moment, but let me give you some color on it. When you look at the component side of it, there is a few different areas we are looking in there, they could be smaller sized acquisitions to fill out some parts of the portfolio. On the sensor side of it and on the automotive side of it, we are looking at in enhancing our product profile and mix there that could be something a little different, but it’s got to be the right acquisition at the right point in time, we are not just going to do anything. John E. Franzreb – Sidoti & Co. LLC: Okay, thank you. Kieran M. O’Sullivan: You’re welcome.

Thank you, and gentlemen we have no one else in queue.

We will give just another minute in case there is another question.

(Operator Instructions)

Hey Cathy, I think at this point you can give the replay information. Thank you.

Okay, thank you. Ladies and gentlemen, this conference will be available for replay after 1:30 PM today through midnight Tuesday November 5. You may access the AT&T Executive playback service at anytime by dialing 1800-475-6701 and entering the access code, 306043. International callers, dial 320-365-3844 using the same access code, 306043. And Mr. Kroll, did you have any closing remarks?

No, thank you very much, Kathy.

Okay, thank you. Then ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive teleconference. You may now disconnect.