8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

___________________

FORM 8-K
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 21, 2004

MTS SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MINNESOTA	0-2382	41-0908057
(STATE OR OTHER JURISDICTION OF INCORPORATION)	(COMMISSION FILE NUMBER)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

14000 TECHNOLOGY DRIVE, EDEN PRAIRIE, MN 55344
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(952) 937-4000
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Item 12.	Results of Operations and Financial Condition
	On July 21, 2004, the registrant issued a press release regarding the registrant’s results of operations for the third quarter of fiscal 2004. The full text of the press release is furnished as Exhibit 99.1 to this Form 8-K.

SIGNATURES

Pursuant to the requirements of the Securities 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 (Registrant)
Date: July 21, 2004	By:/s/   Susan E. Knight
	Susan E. Knight Vice President and Chief Financial Officer

MTS SYSTEMS CORPORATION
FORM 8-K REPORT

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press Release issued on July 21, 2004 regarding the registrant’s results of operations for the third quarter of fiscal 2004, furnished pursuant to Item 12 of this Form 8-K.

EX-99.1

Exhibit 99.1

News Release

FOR IMMEDIATE RELEASE	For More Information Contact:
July 21, 2004	Susan Knight, Chief Financial Officer (952)937-4000 Paul Runice, Treasurer (952) 937-4003

MTS Reports Strong Third Quarter Revenue and Earnings Growth; Raises Full Year Outlook

Eden Prairie, Minn., July 21, 2004 – MTS Systems Corporation (NASDAQ: MTSC) today reported net income of $6.6 million, or $0.31 per diluted share, for its third quarter ended June 26, 2004, a 16 percent increase compared to net income of $5.7 million, or $0.27 per diluted share, for the third quarter of fiscal 2003. Third quarter income before discontinued operations of $6.6 million, or $0.31 per diluted share, increased 61 percent compared to prior year income before discontinued operations of $4.1 million, or $0.19 per diluted share.

Third quarter orders were $79.7 million, a decrease of 19 percent compared to orders of $97.8 million for the third quarter of fiscal 2003, primarily due to decreased Test segment volume in North America and Europe, partially offset by an increase in Industrial segment volume across all geographic areas. Fiscal 2003 results included a $10 million ground vehicle order that did not recur in fiscal 2004. Backlog decreased 6 percent in the quarter, from $216 million to $204 million, reflecting lower order volume.

Revenue for the third quarter was in line with the Company’s expectations at $91.5 million, an increase of 15 percent compared to revenue of $79.3 million for the third quarter of fiscal 2003. This increase was primarily due to project timing and approximately $3 million of favorable currency translation.

“MTS delivered solid revenue and earnings growth for the quarter, consistent with our guidance,” said Sidney W. Emery, Jr., Chairman and CEO. “Orders were at the low end of the expected range due to the lack of significant market recovery in the Test segment, particularly in North America. As a result, we anticipate revenue for the year will be at the low end of the $360-$370 million guidance range. However, given the strength of our earnings performance, we are raising our total year earnings per share outlook from $1.15-$1.20 to $1.18-$1.22. This includes planned investment in both business segments in the fourth quarter.”

Third quarter income from operations was $10.3 million, an increase of 43 percent compared to income from operations of $7.2 million for the third quarter of fiscal 2003, primarily driven by volume in both segments.

Cash flow provided by operations was approximately $9 million for the third quarter, driven by strong earnings. Cash and cash equivalents totaled $147 million at quarter-end, down from $161 million at the end of the second quarter, primarily due to $20.2 million of share repurchases.

MTS News Release
Page 2

Segment Results

Test Segment:

Orders for the Test segment were $64.4 million for the third quarter, down 25 percent compared to orders of $85.7 million for the third quarter of fiscal 2003, driven by decreased volume in both North America and Europe. Backlog decreased 6 percent, from $208 million to $196 million, primarily due to decreased orders. Third quarter revenue was $76.6 million, an increase of 15 percent compared to $66.7 million for the third quarter of fiscal 2003, primarily due to the timing of large custom projects. Gross profit as a percent of revenue was 38.8 percent, an increase of 2.2 percentage points compared to 36.6 percent for the third quarter of fiscal 2003, due to volume and productivity improvements. The segment reported $8.2 million in income from operations, an increase of 34 percent compared to $6.1 million for the third quarter of fiscal 2003.

Industrial Segment:

Orders for the Industrial segment were $15.3 million for the third quarter, an increase of 26 percent compared to orders of $12.1 million for the third quarter of fiscal 2003. This increase reflects higher demand in the Sensors and AeroMet businesses. Backlog was flat at $8 million. Revenue was $14.9 million for the third quarter, an increase of 18 percent compared to revenue of $12.6 million for the third quarter of fiscal 2003, driven by increased volume in the Sensors business. Gross profit as a percent of revenue was 48.4 percent, a decrease of 1.7 percentage points compared to 50.1 percent for the third quarter of fiscal 2003, primarily due to product mix. Income from operations was $2.1 million, an increase of 91 percent compared to income from operations of $1.1 million for the third quarter of fiscal 2003, driven by higher revenue.

Third Quarter Conference Call

A conference call will be held on Thursday, July 22, at 9:00 a.m. CDT (10:00 a.m. EDT). Call +1-773-756-4623; state the Passcode “Third Quarter” and conference leader “Chip Emery”. Telephone re-play will be available through 6:00 p.m. CDT, August 22, 2004. Call +1-203-369-0192 and state the Passcode “4006.”

If you prefer to listen live over the Internet, please log on to the web at <http://www.mts.com/news/financial_news.htm> and click on the webcast image. The call will be archived through 6:00 p.m. CST, November 10, 2004.

About MTS Systems Corporation

MTS Systems Corporation is a global supplier of testing products that help customers accelerate and improve their design, development, and manufacturing processes. MTS products are used for determining the mechanical behavior of materials, products, and structures and include computer-based testing and simulation systems, modeling and testing software, and consulting services. The Company is also a leading manufacturer of industrial position sensors. MTS had 1,630 employees and revenue of $340 million for the fiscal year ended September 27, 2003. Additional information on MTS can be found on the worldwide web at http://www.mts.com.

This release contains “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from historical results and those presently anticipated or projected. In addition to the factors discussed above, other important risk factors are delineated in the Company’s SEC reports, including Form 10-K for the year ended September 27, 2003 and subsequent Form 10-Q’s.

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MTS News Release
Page 3

MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited – in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	June 26, 2004			June 28, 2003			June 26, 2004			June 28, 2003
Revenue	$	91,528		$	79,312		$	264,398		$	256,987
Cost of sales		54,595			48,573			158,574			161,622
Gross profit		36,933			30,739			105,824			95,365
Operating expenses:
Selling		15,341			12,951			43,778			39,303
General and administrative		7,825			6,637			20,858			20,078
Research and development		3,468			3,986			10,529			11,609
Total operating expenses		26,634			23,574			75,165			70,990
Income from operations		10,299			7,165			30,659			24,375
Interest expense		(765	)		(811	)		(2,148	)		(2,804	)
Interest income		495			660			1,360			1,764
Other income (expense), net		580			(917	)		1,904			795
Income before income taxes and discontinued operations		10,609			6,097			31,775			24,130
Provision for income taxes		3,981			2,012			11,029			7,963
Income before discontinued operations		6,628			4,085			20,746			16,167
Discontinued operations:
Income from discontinued operations, net of tax		—			419			—			199
Income (loss) on sale of discontinued businesses, net of tax		—			1,225			—			(1,177	)
Income (loss) from discontinued operations, net of tax		—			1,644			—			(978	)
Net income	$	6,628		$	5,729		$	20,746		$	15,189
Earnings per share:
Basic-
Income before discontinued operations	$	0.32		$	0.19		$	0.99		$	0.77
Discontinued operations:
Income from discontinued operations, net of tax		—			0.02			—			0.01
Income (loss) on sale of discontinued businesses, net of tax		—			0.06			—			(0.06	)
Income (loss) from discontinued operations, net of tax		—			0.08			—			(0.05	)
Earnings per share	$	0.32		$	0.27		$	0.99		$	0.72
Weighted average number of common shares outstanding - basic		20,735			21,049			20,869			21,098
Diluted-
Income before discontinued operations	$	0.31		$	0.19		$	0.96		$	0.76
Discontinued operations:
Income from discontinued operations, net of tax		—			0.02			—			0.01
Income (loss) on sale of discontinued businesses, net of tax		—			0.06			—			(0.06	)
Income (loss) from discontinued operations, net of tax		—			0.08			—			(0.05	)
Earnings per share	$	0.31		$	0.27		$	0.96		$	0.71
Weighted average number of common shares outstanding - diluted		21,566			21,433			21,705			21,397

MTS News Release
Page 4

MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited – in thousands, except per share data)

	June 26, 2004			September 27, 2003
ASSETS
Current Assets:
Cash and cash equivalents	$	146,675		$	74,183
Short-term investments		—			58,560
Accounts receivable, net of allowances for doubtful accounts		67,196			59,637
Unbilled contracts and retainage receivable		26,401			21,939
Inventories		35,722			34,709
Prepaid expense		6,725			3,928
Current deferred tax asset		9,621			9,682
Other current assets		635			2,075
Total current assets		292,975			264,713
Property and Equipment:
Land		2,478			3,247
Buildings and improvements		46,665			47,031
Machinery and equipment		87,677			84,834
Accumulated depreciation		(83,715	)		(78,908	)
Total property and equipment, net		53,105			56,204
Goodwill		4,429			4,383
Other assets		2,171			2,562
Non-current deferred tax asset		2,524			2,516
Total Assets	$	355,204		$	330,378
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Notes payable	$	1,537		$	383
Current maturities of long-term debt		6,845			6,839
Accounts payable		13,189			10,483
Accrued payroll-related costs		25,555			25,308
Advance payments from customers		52,112			40,456
Accrued warranty costs		6,287			4,862
Accrued income taxes		9,062			5,571
Other accrued liabilities		15,275			15,272
Total current liabilities		129,862			109,174
Deferred income taxes		6,533			6,265
Long-term debt, less current maturities		29,195			30,487
Other long-term liabilities		9,267			8,346
Total Liabilities		174,857			154,272
Shareholders’ Investment:
Common stock, $.25 par; 64,000 shares authorized:
20,348 and 20,720 shares issued and outstanding		5,087			5,180
Additional paid-in capital		—			1,534
Retained earnings		164,564			162,076
Accumulated other comprehensive income		10,696			7,316
Total shareholders’ investment		180,347			176,106
Total Liabilities and Shareholders’ Investment	$	355,204		$	330,378