EX-99.1 2 mts061798_ex99-1.txt PRESS RELEASE [LOGO] MTS SYSTEMS CORPORATION 14000 Technology Drive Eden Prairie, MN 55344-2290 Telephone 952-937-4000 FAX 952-937-4515 -------------------------------------------------------------------------------- NEWS RELEASE FOR IMMEDIATE RELEASE For More Information Contact: APRIL 26, 2006 Susan Knight, Chief Financial Officer (952) 937-4000 Paul Runice, Treasurer (952) 937-4003 MTS REPORTS 51% INCREASE IN SECOND QUARTER EPS BEFORE STOCK COMPENSATION EXPENSE; RAISES FULL YEAR EPS OUTLOOK Eden Prairie, Minn., April 26, 2006 - MTS Systems Corporation (NASDAQ: MTSC) today reported second quarter earnings of $0.58 per diluted share on net income of $11.3 million, an increase of 41 percent compared to earnings of $0.41 per diluted share on net income of $8.5 million for the comparable period in fiscal 2005. Excluding $0.9 million stock compensation expense in the second quarter, earnings per diluted share would have been $0.62, an increase of 51 percent over the comparable period in fiscal 2005. Earnings for second quarter fiscal 2006 included a $0.9 million pre-tax gain on the sale of assets associated with the Company's noise and vibration business. "The earnings performance for the quarter was very positive," said Sidney W. Emery, Jr., Chairman and CEO. "Our revenue and gross profit results were indicative of strong operating performance, which -- along with our recent block share buyback -- has caused us to raise our full year EPS guidance. The revised outlook for fiscal 2006 earnings per share is $1.80-$1.90, compared to the previous outlook of $1.66-$1.76. Despite delayed orders in the quarter, we are confirming our revenue guidance range of $395-$405 million for the year." Second quarter orders totaled $81.5 million, down 34 percent compared to orders of $123.1 million for second quarter fiscal 2005, primarily due to a decrease in large custom orders in the Test segment. Second quarter fiscal 2005 orders included two multi-year orders, totaling $43 million, in the ground vehicles and aerospace markets. Backlog decreased 10 percent in the quarter, to $195 million from $216 million. Revenue for the second quarter totaled $102.9 million, up 7 percent compared to $96.1 million for second quarter fiscal 2005. This increase was primarily attributable to increased short-cycle and service business in the Test segment and continued growth in the Industrial segment, partially offset by an estimated $5.2 million unfavorable impact of currency translation. Gross profit for the second quarter was $45.8 million, an increase of 8 percent compared to $42.3 million for second quarter fiscal 2005. This increase was primarily due to increased volume in both segments and reduced Test segment warranty expense. The favorable gross profit was partially offset by an estimated $1.3 million unfavorable impact of currency translation. Second quarter income from operations totaled $17.1 million, up 17 percent compared to income from operations of $14.6 million for second quarter fiscal 2005. This increase was due to higher gross profit and a $0.9 million pre-tax gain on sale of assets of the Company's noise and vibration business, partially offset by planned increases in operating expenses, $1.2 million of stock compensation expense, and an estimated $0.6 million unfavorable impact of currency translation. Net income for the second quarter was $11.3 million, an increase of 33 percent compared to net income of $8.5 million for second quarter fiscal 2005, driven by higher income from operations and a $1.2 million loss from discontinued operations in second quarter 2005. MTS News Release Page 2 Cash, cash equivalents and short-term investments at the end of the second quarter totaled $107 million, reflecting the use of $37.3 million in cash to purchase shares of the Company's common stock during the second quarter, compared to $144 million at the end of first quarter fiscal 2006. SEGMENT RESULTS --------------- TEST SEGMENT: Test segment orders totaled $65.1 million for second quarter fiscal 2006, a decrease of 39 percent compared to orders of $107.2 million for second quarter fiscal 2005, reflecting a decrease in large custom orders. Second quarter fiscal 2005 orders included two multi-year orders totaling $43 million. Backlog decreased 10 percent in the quarter, to $189 million from $210 million. Second quarter revenue was $87.0 million, an increase of 8 percent compared to $80.7 million for second quarter fiscal 2005, reflecting an increase in short-cycle and service business, partially offset by an estimated $4.2 million unfavorable impact of currency translation. Second quarter gross profit was $37.4 million, an increase of 6 percent compared to $35.3 million for second quarter fiscal 2005, primarily due to higher volume and reduced warranty expense, partially offset by unfavorable product mix and an estimated $0.8 million unfavorable impact of currency translation. Income from operations for second quarter fiscal 2006 totaled $14.6 million, up 14 percent compared to income from operations of $12.8 million for second quarter fiscal 2005. The increase was primarily attributable to increased gross profit and a $0.9 million gain on sale of assets of the Company's noise and vibration business, partially offset by planned increases in operating expenses, $1.1 million of stock compensation expense, and an estimated $0.3 million unfavorable impact of currency translation. INDUSTRIAL SEGMENT: Industrial segment orders totaled $16.4 million for the quarter, an increase of 3 percent compared to orders of $15.9 million for second quarter fiscal 2005, reflecting continued growth in the Sensors business in Europe and Asia. Backlog of $6 million was essentially flat in the quarter. Second quarter revenue was $15.9 million, an increase of 3 percent compared to revenue of $15.4 million for second quarter fiscal 2005, net of an estimated $1.0 million unfavorable impact of currency translation. Second quarter gross profit was $8.4 million, an increase of 20 percent compared to $7.0 million for second quarter fiscal 2005. The improvement in gross profit was attributable to favorable product mix and prior year charges associated with product line changes, partially offset by an estimated $0.5 million unfavorable impact of currency translation in second quarter fiscal 2006. Income from operations for second quarter fiscal 2006 was $2.5 million, an increase of 39 percent compared to income from operations of $1.8 million for second quarter fiscal 2005, primarily due to higher volume, partially offset by an estimated $0.3 million unfavorable impact of currency translation. NON-GAAP FINANCIAL MEASURES A reconciliation of financial results before and after the impact of stock compensation expense is included in this release as Exhibit A. This reconciliation includes financial measures that do not reflect generally accepted accounting principles (GAAP). These non-GAAP financial measures are provided for additional clarification of the Company's financial performance. Investors should consider these non-GAAP financial measures in addition to, not as a substitute for or better than, financial measures prepared in accordance with GAAP. MTS News Release Page 3 SECOND QUARTER CONFERENCE CALL ------------------------------ A conference call will be held on Thursday, April 27, at 10:00 a.m. EDT (9:00 a.m. CDT). Call +1-785-832-1508; and state the Conference ID "MTS" or Program Title "MTS Quarterly Conference Call." Telephone re-play will be available through 11:59 p.m. EDT, May 11, 2006. Call +1-402-220-2673. 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 link. The call will be archived through 11:59 p.m. EDT, July 25, 2006. ABOUT MTS SYSTEMS CORPORATION ----------------------------- MTS Systems Corporation is a leading global supplier of test systems and industrial position sensors. The Company's testing hardware and software solutions help customers accelerate and improve their design, development, and manufacturing processes and are used for determining the mechanical behavior of materials, products, and structures. MTS' high-performance position sensors provide controls for a variety of industrial and vehicular applications. MTS had 1,549 employees and revenue of $374 million for the fiscal year ended October 1, 2005. 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. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. IN ADDITION TO THE FACTORS DISCUSSED ABOVE, OTHER IMPORTANT RISK FACTORS ARE DELINEATED IN THE COMPANY'S MOST RECENT SEC FORM 10-Q AND 10-K FILINGS. MTS News Release Page 4 MTS SYSTEMS CORPORATION Consolidated Statements of Income (unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended ---------------------- ---------------------- APRIL 1, April 2, APRIL 1, April 2, 2006 2005 2006 2005 --------- --------- --------- --------- Revenue: Product $ 89,035 $ 83,597 $ 168,524 $ 166,829 Service 13,833 12,518 26,187 22,367 --------- --------- --------- --------- Total revenue 102,868 96,115 194,711 189,196 --------- --------- --------- --------- Cost of sales: Product 50,882 47,857 95,897 95,973 Service 6,205 5,912 12,464 11,141 --------- --------- --------- --------- Total cost of sales 57,087 53,769 108,361 107,114 --------- --------- --------- --------- Gross profit 45,781 42,346 86,350 82,082 --------- --------- --------- --------- Operating expenses: Selling 15,933 16,016 31,937 31,199 General and administrative 8,896 7,824 17,000 14,745 Research and development 4,694 3,910 8,841 7,625 --------- --------- --------- --------- Total operating expenses 29,523 27,750 57,778 53,569 --------- --------- --------- --------- Gain on sale of assets 860 -- 860 -- --------- --------- --------- --------- Income from operations 17,118 14,596 29,432 28,513 --------- --------- --------- --------- Interest expense (415) (520) (869) (1,115) Interest income 782 485 1,464 890 Other income, net 302 269 327 424 --------- --------- --------- --------- Income before income taxes and discontinued operations 17,787 14,830 30,354 28,712 Provision for income taxes 6,488 5,151 11,099 10,301 --------- --------- --------- --------- Income before discontinued operations 11,299 9,679 19,255 18,411 --------- --------- --------- --------- Discontinued operations: Loss from discontinued operations, net of tax -- (1,206) -- (1,746) --------- --------- --------- --------- Net income $ 11,299 $ 8,473 $ 19,255 $ 16,665 ========= ========= ========= ========= Earnings per share: Basic- Income before discontinued operations $ 0.59 $ 0.49 $ 1.00 $ 0.93 Discontinued operations: Loss from discontinued operations, net of tax -- (0.06) -- (0.09) --------- --------- --------- --------- Earnings per share $ 0.59 $ 0.43 $ 1.00 $ 0.84 ========= ========= ========= ========= Weighted average number of common shares outstanding - basic 9,072 19,857 19,263 19,783 ========= ========= ========= ========= Diluted- Income before discontinued operations $ 0.58 $ 0.47 $ 0.97 $ 0.89 Discontinued operations: Loss from discontinued operations, net of tax -- (0.06) -- (0.08) --------- --------- --------- --------- Earnings per share $ 0.58 $ 0.41 $ 0.97 $ 0.81 ========= ========= ========= ========= Weighted average number of common shares outstanding - diluted 19,580 20,654 19,792 20,625 ========= ========= ========= =========
MTS News Release Page 5 MTS SYSTEMS CORPORATION Consolidated Balance Sheets (unaudited - in thousands, except per share data)
APRIL 1, October 1, 2006 2005 --------- --------- ASSETS Current Assets: Cash and cash equivalents $ 84,159 $ 83,143 Short-term investments 23,025 76,650 Accounts receivable, net of allowances for doubtful accounts 73,682 64,363 Unbilled accounts receivable 30,271 25,093 Inventories 40,505 38,029 Prepaid expenses 4,790 2,600 Current deferred tax assets 6,418 6,415 Other current assets 2,217 2,351 Assets of discontinued operations 1,433 1,710 --------- --------- Total current assets 266,500 300,354 --------- --------- Property and Equipment: Land 1,668 1,668 Buildings and improvements 41,048 40,906 Machinery and equipment 76,659 72,837 Accumulated depreciation (76,153) (72,458) --------- --------- Total property and equipment, net 43,222 42,953 --------- --------- Goodwill 4,428 4,423 Other assets 2,119 2,291 Non-current deferred tax assets 1,710 1,711 --------- --------- Total Assets $ 317,979 $ 351,732 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Notes payable $ 1,579 $ 1,582 Current maturities of long-term debt 6,683 6,708 Accounts payable 17,567 16,142 Accrued payroll-related costs 23,719 31,059 Advance payments from customers 58,487 49,901 Accrued warranty costs 4,511 5,333 Accrued income taxes 6,546 3,643 Current deferred income taxes 3,792 3,767 Other accrued liabilities 17,152 15,026 Liabilities of discontinued operations 150 890 --------- --------- Total current liabilities 140,186 134,051 --------- --------- Deferred income taxes 2,314 2,310 Long-term debt, less current maturities 14,519 15,673 Other long-term liabilities 11,834 11,266 --------- --------- Total Liabilities 168,853 163,300 --------- --------- Shareholders' Investment: Common stock, $.25 par; 64,000 shares authorized: 18,200 and 19,664 shares issued and outstanding 4,550 4,916 Retained earnings 135,755 173,487 Accumulated other comprehensive income 8,821 10,029 --------- --------- Total shareholders' investment 149,126 188,432 --------- --------- Total Liabilities and Shareholders' Investment $ 317,979 $ 351,732 ========= =========
MTS News Release Page 6 EXHIBIT A MTS SYSTEMS CORPORATION Stock Compensation Expense Reconciliation (unaudited - in thousands, except per share data)
Three Months Ended Six Months Ended ------------------- ------------------- APRIL 1, April 2, APRIL 1, April 2, 2006 2005 2006 2005 -------- -------- -------- -------- REVENUE $102,868 $ 96,115 $194,711 $189,196 -------- -------- -------- -------- GROSS PROFIT: Before stock compensation expense $ 46,153 $ 42,346 $ 86,840 $ 82,082 Stock compensation expense 372 -- 490 -- -------- -------- -------- -------- Gross profit $ 45,781 $ 42,346 $ 86,350 $ 82,082 -------- -------- -------- -------- OPERATING EXPENSES: Selling expense before stock compensation expense $ 15,684 $ 16,016 $ 31,413 $ 31,199 Stock compensation expense 249 -- 524 -- -------- -------- -------- -------- Selling expense $ 15,933 $ 16,016 $ 31,937 $ 31,199 -------- -------- -------- -------- General and administrative expense before stock compensation expense $ 8,310 $ 7,824 $ 15,911 $ 14,745 Stock compensation expense 586 -- 1,089 -- -------- -------- -------- -------- General and administrative expense $ 8,896 $ 7,824 $ 17,000 $ 14,745 -------- -------- -------- -------- Research and development expense before stock compensation expense $ 4,675 $ 3,910 $ 8,802 $ 7,625 Stock compensation expense 19 -- 39 -- -------- -------- -------- -------- Research and development expense $ 4,694 $ 3,910 $ 8,841 $ 7,625 -------- -------- -------- -------- Total operating expenses before stock compensation expense $ 28,669 $ 27,750 $ 56,126 $ 53,569 Stock compensation expense 854 -- 1,652 -- -------- -------- -------- -------- Total operating expenses $ 29,523 $ 27,750 $ 57,778 $ 53,569 -------- -------- -------- -------- INCOME FROM OPERATIONS: Before stock compensation expense $ 18,344 $ 14,596 $ 31,574 $ 28,513 Stock compensation expense 1,226 -- 2,142 -- -------- -------- -------- -------- Income from operations $ 17,118 $ 14,596 $ 29,432 $ 28,513 -------- -------- -------- -------- NET INCOME: Before stock compensation expense $ 12,193 $ 8,473 $ 20,826 $ 16,665 Stock compensation expense 894 -- 1,571 -- -------- -------- -------- -------- Net income $ 11,299 $ 8,473 $ 19,255 $ 16,665 -------- -------- -------- -------- EARNINGS PER SHARE - DILUTED: Before stock compensation expense $ 0.62 $ 0.41 $ 1.05 $ 0.81 Stock compensation expense 0.04 -- 0.08 -- -------- -------- -------- -------- Earnings per share - diluted $ 0.58 $ 0.41 $ 0.97 $ 0.81 -------- -------- -------- --------