-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B4wg4bL27pj3re8dGJ/JYiuiQsRRbvut1s8K5e8vkyvhdHhw97STDp0UnnivoxPa TxrIOmDCgTinrMxWK6HnSg== 0000897101-96-000059.txt : 19960216 0000897101-96-000059.hdr.sgml : 19960216 ACCESSION NUMBER: 0000897101-96-000059 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MTS SYSTEMS CORP CENTRAL INDEX KEY: 0000068709 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 410908057 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02382 FILM NUMBER: 96518818 BUSINESS ADDRESS: STREET 1: 14000 TECHNOLOGY DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344-2290 BUSINESS PHONE: 6129374000 MAIL ADDRESS: STREET 1: 14000 TECHNOLOGY DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 FORMER COMPANY: FORMER CONFORMED NAME: RESEARCH INC DATE OF NAME CHANGE: 19670216 10-Q 1 United States SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) or the Securities Exchange Act of 1934 For quarterly period ended December 31, 1995 Commission File Number 0-2382 MTS SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 612-937-4000 41-0908057 (State or other jurisdiction of (Telephone number of registrant (I.R.S. Employer incorporation or organization) including area code) Identification No.)
14000 Technology Drive, Eden Prairie, Minnesota 55344 (Address of principal executive offices) (Zip Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _X_ Yes ___ No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.25 par value; 4,688,854 shares outstanding. PART I. FINANCIAL INFORMATION MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 AND SEPTEMBER 30, 1995 December 31 September 30 1995 1995 ASSETS UNAUDITED AUDITED (expressed in $ 000's) Cash and cash equivalents $ 11,325 $ 8,736 Accounts receivable 58,766 65,106 Unbilled contracts and retainage receivable 18,923 19,668 Inventories- Customer jobs-in-process 15,931 13,304 Components, assemblies and parts 23,061 22,365 Prepaid expenses 3,132 2,410 --------- --------- Total current assets 131,138 131,589 Land 3,461 3,461 Buildings and improvements 38,696 38,574 Machinery and equipment 55,066 55,826 Accumulated depreciation (49,671) (49,371) --------- --------- Total property and equipment 47,552 48,490 Other assets 9,238 9,421 --------- --------- $ 187,928 $ 189,500 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Notes payable to banks $ 8,177 $ 10,475 Current maturities of long-term debt 911 1,043 Accounts payable 9,718 11,768 Accrued compensation and benefits 19,123 20,194 Advance billings to customers 16,569 14,784 Other accrued liabilities 9,249 8,475 Accrued income taxes (1,420) 275 --------- --------- Total current liabilities 62,327 67,014 --------- --------- Deferred income taxes 4,351 4,362 Long-term debt, less current maturities 11,342 11,447 --------- --------- Common stock, $.25 par; 16,000,000 shares authorized: 4,688,854 and 4,598,311 shares issued and outstanding 1,172 1,150 Additional paid-in capital 1,952 255 Retained earnings 102,123 100,443 Cumulative translation adjustment 4,661 4,829 --------- --------- Total shareholders' investment 109,908 106,677 --------- --------- $ 187,928 $ 189,500 ========= ========= MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE 3 MONTHS ENDED DECEMBER 31, 1995 AND 1994 (UNAUDITED) FOR THE 3 MONTHS ENDED DECEMBER 31 1995 1994 (expressed in 000's except for per share amounts) NET REVENUES $ 56,135 $ 49,468 COST OF REVENUES 32,268 31,273 --------- --------- Gross profit 23,867 18,195 OPERATING EXPENSES: Selling 11,337 10,147 General and administrative 3,703 3,145 Research and development 3,767 2,979 Interest expense 455 416 Interest income (27) (25) Other (income) and expense, net 1,062 (119) --------- --------- Total operating expense 20,297 16,543 --------- --------- INCOME BEFORE INCOME TAXES 3,570 1,652 PROVISION FOR INCOME TAXES 1,140 413 --------- --------- NET INCOME $ 2,430 $ 1,239 ========= ========= EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 0.51 $ 0.27 ========= ========= DIVIDENDS PER SHARE $ 0.16 $ 0.14 ========= ========= BACKLOG $ 107,672 $ 89,552 ========= ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,729 4,551 ========= ========= MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE 3 MONTHS ENDED DECEMBER 31, 1995 AND 1994 (UNAUDITED) FOR THE 3 MONTHS ENDED December 31 1995 1994 -------- --------- (expressed in $000's) OPERATING ACTIVITIES Net income $ 2,430 $ 1,239 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 1,801 1,623 Deferred income taxes (11) 7 Changes in operating assets and liabilities: Receivables, including accounts, unbilled contracts and retainages 7,086 6,286 Inventories (3,323) (1,356) Prepaid expenses (722) (539) Accrued income taxes (1,695) (1,734) Advance billings to customers 1,784 1,906 Other, net (2,347) (4,014) -------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,003 3,418 -------- --------- INVESTING ACTIVITIES Property and equipment, net (705) (875) Purchase of PowerTek, Inc. -- (4,687) Other assets 25 436 -------- --------- NET CASH USED IN INVESTING ACTIVITIES (680) (5,126) -------- --------- FINANCING ACTIVITIES Net borrowings (payments) on notes payable (2,298) 8,009 Payments on long-term borrowings (237) (220) Cash dividends (750) (633) Proceeds from employee stock option and stock purchase plans 1,719 55 Payments to purchase and retire common stock -- (2,848) -------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES (1,566) (4,363) -------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (168) 5 -------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,589 2,660 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,736 4,919 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,325 $ 7,579 ======== ======== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND TRANSLATION. The consolidated financial statements include the accounts of MTS SYSTEMS CORPORATION (the Company) and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. All balance sheet accounts of foreign subsidiaries are translated at the current exchange rate as of the end of the accounting period. Income statement items are translated at average currency exchange rates. The resulting translation adjustment is recorded as a separate component of shareholders' investment. Gains and losses resulting from foreign currency transactions are included in "Other (income) and expense, net" in the consolidated Statements of Income. REVENUE RECOGNITION. Revenue is recognized upon shipment of equipment when the customer's order can be manufactured, delivered and installed in less than nine months. Revenue on contracts requiring longer delivery periods (long-term contracts) and other customized orders which permit progress billings is recognized using the percentage-of-completion method based on the cost incurred to date relative to estimated total cost of the contract (cost-to-cost method). The cumulative effects of revisions of estimated total contract costs and revenues are recorded in the period in which the facts become known. When a loss is anticipated on a contract, the amount thereof is provided currently. LONG-TERM CONTRACTS. The Company enters into long-term contracts for customized equipment sold to its customers. Under terms of certain contracts, revenue recognized using the percent-of-completion method may not be invoiced until completion of contractual milestones, upon shipment of the equipment, or upon installation and acceptance by the customer. Unbilled amounts for such contracts appear in the consolidated balance sheets as unbilled contracts and retainage receivable. Amounts unbilled or retained at December 31, 1995 are expected to be invoiced in fiscal 1996. OTHER FINANCIAL STATEMENT DISCLOSURE. The Notes to Consolidated Financial Statements appearing in the Company's September 30, 1995 Annual Report to Shareholders on pages 20 through 27 are incorporated herein by reference. MANAGEMENT'S INTERIM FINANCIAL STATEMENT REPRESENTATION. The unaudited interim financial statements furnished herein reflect all adjustments which are, in the opinion of management, necessary to fairly state the results of the interim periods presented. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS New Orders and Backlog New orders for the first quarter of fiscal 1996, ended December 31, 1995, were $65 million, a 25% increase over the comparable quarter in fiscal 1995. Order activity in the Mechanical Testing and Simulation (MT&S) sector was 31% ahead of the prior year with the most significant increases coming from the automotive market. International customers accounted for 52% of MT&S sector orders compared to 49% one year ago. Order activity in the Measurement and Automation Group (MAG) sector increased 12% over the same period a year ago. International orders were 23% of the MAG total for both periods. Backlog of undelivered orders at December 31, 1995 was $108 million, an increase of 9% from September 30, 1995. Results of Operations Revenues for the first quarter exceeded $56 million, a 13% increase from the same quarter one year ago. MT&S sector revenues increased 12% while MAG revenues increased 21%. MT&S revenues accounted for 80% of total revenues for the quarters ended December 31, 1995 and 1994, respectively. International revenue accounted for 52% and 43% of total revenue for the quarters ended in 1995 and 1994, respectively. Income before income taxes more than doubled to $3,570,000 compared to $1,652,000 for the quarter ended a year ago. The increase in pretax earnings results primarily from improved manufacturing margins in the MT&S sector leveraged by increased revenue volume. Consolidated gross margin percents were 42% and 37% for the periods ended December 31, 1995 and 1994, respectively. The improvement reflects completion of fiscal 1994 MT&S business that contained (i) lower margin system orders accepted during a period of weak demand in Europe and Japan and (ii) other custom projects with significant technological challenges. The improvement in gross margins began during the fourth quarter of fiscal 1995, and this quarter's results reflect continuation of that trend. Margins in the MT&S sector's current backlog and the mix of projected orders suggest that this quarter's gross margins will continue in future quarters of fiscal 1996. Increases in operating expenses offset some of the gross margin contribution. Selling expenses increased 12% as the Company continued to expand its sales presence in the Far East. Research and development expenses increased 26% as development programs were accelerated in both business sectors. Other operating expenses also increased from the impact of translating international subsidiary financial statements and the settlement of specific transactions denominated in foreign currencies. Net income for the quarter increased 96% to $2,430,000 compared to the comparable quarter one year ago. The effective tax rate for the quarter ended December 31, 1995 was 32% compared to 25% for the quarter ended in 1994 and the year ended September 30, 1995. The current quarter's provision for income taxes excludes any benefit from the Research and Development Tax Credit, which expired in June 1995. Should the credit be retroactively reinstated, the Company expects the effective tax rate for the year would become 29% to 30%. Financial Condition and Liquidity The ratio of current assets to current liabilities at December 31 was 2.1 compared to 2.0 at September 30, 1995. Cash and cash equivalents increased 30% to $11.3 million at December 31 compared to $8.7 million at September 30, 1995. The Company's borrowing under its $70 million lines of credit was $8.2 million at December 31 compared to $10.5 million at September 30, 1995. The decrease in borrowing results from increased cashflow from more profitable operations and collections of September 1995 receivables which arose from record shipments during the fourth quarter of fiscal 1995. Capital expenditures, net of retirements for the first quarter totaled $705,000. The Company's total debt to equity ratio decreased to 19% at December 31 from 22% at September 30, 1995 reflecting the above mentioned reduction in short-term borrowings. The Company's past financial performance, the availability of credit under its borrowing facilities, available cash and cash equivalents provide sufficient resources for growth, expansion and diversification. PART II-------OTHER INFORMATION ITEM 5. Other Information. On January 30, 1996 the Company's shareholders held the Annual Shareholders meeting. With shareholders voting 96% of the outstanding shares, actions passed to re-elect the Board of Directors, ratify the appointment of Arthur Andersen LLP as the Company's independent public auditors, and amend the Articles of Incorporation to increase the total number of authorized shares of common stock from 16 to 32 million. The Company's Board of Directors declared a two-for-one stock split at their January 30 board meeting, in the form of a one hundred percent stock dividend. The Directors also approved a quarterly dividend of $.08 per share on the new post-split basis. The dividend payment and new shares will have a March 8, 1996 record date, and an April 1, 1996 payment and issue date. Previously, at their November 1995 board meeting, the Directors had authorized an increase in the quarterly dividend to $.16 from $.14 per share (split adjusted, $.08 per share from $.07 per share). ITEM 6. Exhibits and Reports on Form 8-K. The following are submitted as part of this report. (a) Exhibit 27. Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MTS SYSTEMS CORPORATION /s/ D.M. Sullivan D.M. Sullivan Chairman, President and Chief Executive Officer /s/ M.L. Carpenter M.L. Carpenter Vice President Chief Financial Officer Dated: February 14, 1996 EX-27 2
5 3-MOS SEP-30-1996 DEC-31-1995 11,325 0 79,530 1,841 38,992 131,138 97,223 49,671 187,928 62,327 12,253 0 0 1,172 1,952 187,928 56,135 56,135 32,268 52,565 1,062 17 455 3,570 1,140 3,570 0 0 0 2,430 .51 .51
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