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):  May 6, 2010

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)

N/A

(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4c))

Item 2.02.  Results of Operations and Financial Condition

On May 6, 2010, the registrant issued a press release regarding the registrant’s results of operations for the second quarter ended April 3, 2010.  The full text of the press release is furnished as Exhibit 99.1 to this Form 8-K.

Item 9.01.  Financial Statements and Exhibits

(d)  Exhibits

Exhibit 99.1 – Press Release issued on May 6, 2010 regarding the registrant’s results of operations for the second quarter ended April 3, 2010 furnished pursuant to Item 2.02 of this Form 8-K.

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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 hereunto duly authorized.

	MTS SYSTEMS CORPORATION
	(Registrant)
Date: May 6, 2010	By:	/s/ SUSAN E. KNIGHT
		Susan E. Knight
		Vice President and Chief Financial Officer

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MTS SYSTEMS CORPORATION

FORM 8-K REPORT

INDEX TO EXHIBITS

Exhibit No.	Description
99.1	Press Release issued on May 6, 2010 regarding the registrant’s results of operations for the second quarter ended April 3, 2010 furnished pursuant to Item 2.02 of this Form 8-K.

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EX-99.1

Exhibit 99.1

MTS Systems Corporation 14000 Technology Drive
Eden Prairie, MN  55344-2290
Telephone 952-937-4000
Fax 952-937-4515

News Release

FOR IMMEDIATE RELEASE
May 6, 2010   For More Information Contact:
Susan Knight, Chief Financial Officer
(952) 937-4000

MTS REPORTS 2010 SECOND QUARTER FINANCIAL RESULTS

Ø	Revenue increased 6 percent sequentially, reflecting higher beginning backlog and order levels
Ø	EPS rose 61 percent sequentially on higher volumes and continued cost management
Ø	Base orders rose 7 percent sequentially. Overall orders declined 13 percent due to $20 million of large orders that favorably impacted Q1
Ø	Cash generated from operating activities grew to $26 million from $2 million in Q1
Ø	Company expects full year 2010 to reflect current market momentum in Sensors and continued variability in Test

Eden Prairie, Minn., May 6, 2010 – MTS Systems Corporation (NASDAQ: MTSC) today reported fiscal 2010 second quarter financial results.

“We are pleased to be participating in the improving global economy in both our shorter-cycle Sensors business and longer-cycle Test business” said Laura B. Hamilton, MTS chief executive officer and chair. “The quarterly variability in large orders (defined as in excess of $5 million), which is the nature of the Test business, continues in this environment. From an economic perspective, we maintain our healthy skepticism about significant long-term improvement in the underlying fundamentals around the world. We remain well positioned in the world’s emerging geographies and industries – to both capitalize on near-term momentum and longer-term market opportunity as it evolves.”

Sequential Quarter Results

Orders were $93.4 million, 13 percent lower than first quarter 2010. Test orders declined 20 percent, while Sensors orders rose 19 percent. There were no large orders in the current quarter, compared to two large Test orders totaling $20 million in the first quarter of 2010. Excluding large orders, which contribute to quarter-to-quarter variability, base orders increased 7 percent. Backlog decreased 2 percent to $181 million.

Revenue was $94.3 million, an increase of 6 percent compared to the previous quarter. The improvement was comprised of 5 percent growth in Test, resulting from higher beginning backlog, and 11 percent growth in Sensors due to increased order volume.

Gross profit was $38.5 million, up 10 percent compared to first quarter 2010. The gross margin rate was 40.9 percent, up 1.4 percentage points, driven primarily by lower warranty expense resulting from the favorable impact of the settlement of a specific claim.

Income from operations was $10.1 million, an increase of $3.7 million compared to the prior quarter, due to higher revenue. Operating expenses fell 1 percent in the second quarter.

Net earnings were $0.37 per share, an increase of $0.14, or 61 percent, compared to the prior quarter, driven by revenue growth and reduced warranty expenses.

MTS News Release

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Cash Position

Cash and cash equivalents at the end of the second quarter totaled $122.1 million, compared to $113.7 million at the end of first quarter fiscal 2010. Operating activities generated cash of $26.2 million in the second quarter. During the second quarter, the Company invested $3.2 million in capital expenditures, paid $4.9 million in dividends and purchased approximately 158,800 shares of its common stock for $4.5 million.

Sequential Quarter Segment Results

Test Segment:

Orders totaled $72.4 million, a decrease of 20 percent compared to first quarter 2010. Orders in the prior quarter included two large custom orders totaling $20 million. There were no such orders in the current quarter. Excluding these two large orders, base orders increased 3 percent. Backlog decreased 3 percent to $167 million. Revenue was $75.3 million, up 5 percent, driven by higher beginning backlog compared to the prior quarter. Currency translation unfavorably impacted revenue by 2 percent.

Gross profit was $28.4 million, an improvement of $2.6 million or 10 percent, compared to last quarter. The second quarter gross margin rate was 37.8 percent, an increase of 1.9 percentage points compared to the prior quarter. The increase includes a 2.1 percentage point favorable impact due to lower warranty expense from the previously mentioned settlement of a specific claim.

Income from operations was $6.3 million, an increase of 94 percent compared to the prior quarter, driven by revenue growth as well as a 2 percent decrease in operating expenses.

Sensors Segment:

Orders totaled $21.0 million, a 19 percent increase compared to first quarter 2010, due to higher volume across all geographies, partially offset by a 5 percent unfavorable impact of currency translation. Backlog improved 14 percent to $13 million. Revenue was $19.0 million, an increase of 11 percent, driven by higher order volume, partially offset by a 4 percent unfavorable impact of currency translation. Gross profit was $10.1 million, up $0.7 million or 7 percent. Second quarter gross margin rate was 53.2 percent, a decrease of 1.6 percentage points compared to the prior quarter, due to a $0.2 million inventory write-off and increased variable compensation.

Income from operations was $3.8 million, an increase of $0.6 million compared to first quarter fiscal 2010, resulting from higher gross profit.

Year-over-Year Second Quarter Results

Orders for the second quarter rose 35 percent compared to second quarter 2009, due to higher volume across all geographies in both segments, and a 3 percent favorable impact of currency translation. Revenue was $94.3 million, a decrease of 12 percent, primarily due to a 16 percent lower opening backlog, which was partially offset by a 2 percent favorable impact of currency translation. In the second quarter of 2009, MTS’ revenue had not been significantly impacted by the effects of the global economic downturn due to the backlog cycle of the Test business.

Gross profit was $38.5 million, down 7 percent. The gross margin rate was 40.9 percent, an increase of 2.3 percentage points, primarily due to lower warranty expense in the Test segment from the previously mentioned settlement of a specific claim and severance charges in the second quarter 2009, partially offset by increased variable compensation in the second quarter 2010. Income from operations was $10.1 million, a decline of 14 percent, chiefly driven by lower gross profit, partially offset by a $1.3 million reduction in operating expenses. Income from operations in fiscal 2009 included $2.8 million of severance charges. Earnings per share for the quarter decreased 16 percent to $0.37 per share, as a result of lower income from operations and a higher tax rate, partially offset by reductions in currency-related losses. The tax rate for the quarter rose to 36.1% from 27.9% primarily due to the enactment of legislation in the prior year that retroactively extended the U.S. R&D tax credits. This legislation expired as of the end of the first quarter of the current year.

MTS News Release

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Hamilton concluded, “Our results during the second quarter reflect the benefits of our efforts to resize our business while retaining the resources necessary to successfully participate in current market opportunities. We continue to make important investments in our businesses as we pursue attractive opportunities in growing geographies, including China and India, in our traditional markets including ground vehicles and industrial machines, as well as in emerging applications such as wind energy and mobile hydraulics.”

Outlook

Looking ahead, MTS expects to continue to benefit from higher order volume and strong cost-management. However, Test backlog is not expected to turn as quickly as it did in the first half due to an increasing proportion of custom projects, customer site-readiness factors and capacity alignment. The company sees the second half revenue results roughly in line with the first half, with the fourth quarter stronger than the third.  Earnings per share for the second half are expected to be flat to up 15% based on revenue volume.

Second Quarter Conference Call

A conference call will be held on May 7, 2010, at 10 a.m. EDT (9 a.m. CDT).  Call +1-719-325-4773 (Toll Free: +1-877-856-1955); and reference the conference pass code “5765043.” Telephone re-play will be available until 12 p.m. CDT, May 14, 2010. Call +1-719-457-0820 (Toll Free: +1-888-203-1112); and reference the conference replay pass code “5765043.”

A transcript of the call can also be accessed from the MTS website at http://www.mts.com/en/InvestorRelations/index.asp. It will be available on May 19, 2010.

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 2,015 employees and revenue of $409 million for the fiscal year ended October 3, 2009. 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. Important risk factors are delineated in the Company’s most recent SEC Form 10-Q and 10-K filings.

MTS News Release

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

	Three Months Ended						Six Months Ended
	April 3, 2010			March 28, 2009			April 3, 2010			March 28, 2009
Revenue	$	94,270		$	107,652		$	183,230		$	224,261
Cost of sales		55,742			66,139			109,520			138,527
Gross profit		38,528			41,513			73,710			85,734
Gross margin		40.9	%		38.6	%		40.2	%		38.2	%
Operating expenses:
Selling, general and administrative		24,753			25,892			50,137			54,915
Research and development		3,682			3,874			7,052			7,133
Total operating expenses		28,435			29,766			57,189			62,048
Income from operations		10,093			11,747			16,521			23,686
Operating margin		10.7	%		10.9	%		9.0	%		10.6	%
Interest expense, net		(429	)		(252	)		(837	)		(243	)
Other expense, net		(4	)		(1,136	)		(323	)		(242	)
Income before income taxes		9,660			10,359			15,361			23,201
Provision for income taxes		3,486			2,886			5,350			5,977
Net income	$	6,174		$	7,473		$	10,011		$	17,224
Earnings per share:
Basic-
Earnings per share	$	0.37		$	0.44		$	0.61		$	1.02
Weighted average number of common shares outstanding - basic		16,467			16,841			16,523			16,888
Diluted-
Earnings per share	$	0.37		$	0.44		$	0.60		$	1.02
Weighted average number of common shares outstanding - diluted		16,531			16,881			16,574			16,935

MTS News Release

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

	April 3, 2010		October 3, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	122,082	$	118,885
Accounts receivable, net		69,491		72,553
Unbilled accounts receivable		20,149		27,246
Inventories		45,972		47,969
Other current assets		20,622		18,905
Total current assets		278,316		285,558
Property and equipment, net		54,943		56,118
Goodwill		15,097		15,206
Intangibles, net		23,901		23,826
Other assets		5,222		6,206
Total Assets	$	377,479	$	386,914
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Short-term borrowings	$	40,254	$	40,182
Accounts payable		19,279		18,630
Advance payments from customers		50,294		46,739
Other accrued liabilities		56,616		62,441
Total current liabilities		166,443		167,992
Other long-term liabilities		14,560		14,957
Total Liabilities		181,003		182,949
Shareholders’ Investment:
Common stock, $.25 par; 64,000 shares authorized:
16,368 and 16,564 shares issued and outstanding		4,092		4,141
Retained earnings		174,970		174,301
Accumulated other comprehensive income		17,414		25,523
Total shareholders’ investment		196,476		203,965
Total Liabilities and Shareholders’ Investment	$	377,479	$	386,914

MTS News Release

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Exhibit A
MTS SYSTEMS CORPORATION
Sequential Segment Financial Information
 (unaudited - in thousands)

	Three Months Ended
Test Segment	April 3, 2010			January 2, 2010		% Variance
Orders	$	72,431		$	90,100		-20%
Revenue	$	75,331		$	71,873		5%
Cost of sales		46,871			46,060		2%
Gross profit		28,460			25,813		10%
Gross margin		37.8	%		35.9	%	1.9%
Operating expenses		22,177			22,576		-2%
Income from operations	$	6,283		$	3,237		94%
Sensors Segment
Orders	$	20,968		$	17,588		19%
Revenue	$	18,939		$	17,087		11%
Cost of sales		8,871			7,718		15%
Gross profit		10,068			9,369		7%
Gross margin		53.2	%		54.8	%	-1.7%
Operating expenses		6,258			6,178		1%
Income from operations	$	3,810		$	3,191		19%
Total Company
Orders	$	93,399		$	107,688		-13%
Revenue	$	94,270		$	88,960		6%
Cost of sales		55,742			53,778		4%
Gross profit		38,528			35,182		10%
Gross margin		40.9	%		39.5	%	1.3%
Operating expenses		28,435			28,754		-1%
Income from operations	$	10,093		$	6,428		57%

MTS News Release

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Exhibit B
MTS SYSTEMS CORPORATION
Segment Financial Information
(unaudited - in thousands)

	Three Months Ended
Test Segment	April 3, 2010			March 28, 2009		% Variance
Orders	$	72,431		$	53,479		35%
Revenue	$	75,331		$	90,929		-17%
Cost of sales		46,871			58,445		-20%
Gross profit		28,460			32,484		-12%
Gross margin		37.8	%		35.7	%	2.1%
Operating expenses		22,177			23,213		-4%
Income from operations	$	6,283		$	9,271		-32%
Sensors Segment
Orders	$	20,968		$	15,735		33%
Revenue	$	18,939		$	16,723		13%
Cost of sales		8,871			7,694		15%
Gross profit		10,068			9,029		12%
Gross margin		53.2	%		54.0	%	-0.8%
Operating expenses		6,258			6,553		-5%
Income from operations	$	3,810		$	2,476		54%
Total Company
Orders	$	93,399		$	69,214		35%
Revenue	$	94,270		$	107,652		-12%
Cost of sales		55,742			66,139		-16%
Gross profit		38,528			41,513		-7%
Gross margin		40.9	%		38.6	%	2.3%
Operating expenses		28,435			29,766		-4%
Income from operations(1)	$	10,093		$	11,747		-14%

(1)   Income from operations for the three months ended March 28, 2009 includes severance charges of $2,816 thousand, of which $1,183 thousand and $1,633 thousand are reported in Cost of Sales and Operating Expenses, respectively.