-----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, U2HphCYM4wCAzYlM0ffHlhseAiNN+D5MkoqrkzvE18a5opkuX8r7Qt3iqVpSfCmQ swGxNY78Jxnre5U4xU18kg== 0000897101-98-000162.txt : 19980218 0000897101-98-000162.hdr.sgml : 19980218 ACCESSION NUMBER: 0000897101-98-000162 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MTS SYSTEMS CORP CENTRAL INDEX KEY: 0000068709 STANDARD INDUSTRIAL CLASSIFICATION: MEASURING & CONTROLLING DEVICES, NEC [3829] IRS NUMBER: 410908057 STATE OF INCORPORATION: MN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-02382 FILM NUMBER: 98540936 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, 1997 Commission File Number 0-2382 ----------------------------- MTS SYSTEMS CORPORATION (Exact name of registrant as specified in its charter) MINNESOTA 612-937-4000 (State or other jurisdiction of (Telephone number of registrant incorporation or organization) including area code) 41-0908057 (I.R.S. Employer 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; 9,158,975 shares outstanding. PART I. FINANCIAL INFORMATION MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND SEPTEMBER 30, 1997 December 31 September 30 1997 1997 ASSETS UNAUDITED AUDITED (expressed in $ 000's) Cash and cash equivalents $ 8,908 $ 10,285 Accounts receivable 62,773 62,023 Unbilled contracts and retainage receivable 35,105 32,653 Inventories- Customer jobs-in-process 7,761 5,559 Components, assemblies and parts 39,672 38,032 Prepaid expenses 4,622 4,253 --------- --------- Total current assets 158,841 152,805 --------- --------- Land 2,442 2,453 Buildings and improvements 39,064 37,779 Machinery and equipment 70,788 68,071 Accumulated depreciation (59,308) (57,884) --------- --------- Total property and equipment 52,986 50,419 --------- --------- Other assets 12,393 12,908 --------- --------- $ 224,220 $ 216,132 ========= ========= LIABILITIES AND SHAREHOLDERS' INVESTMENT Notes payable to banks $ 14,534 $ 4,356 Current maturities of long-term debt 768 920 Accounts payable 13,735 17,771 Accrued compensation and benefits 20,314 25,487 Advance billings to customers 24,623 21,065 Other accrued liabilities 11,538 9,880 --------- --------- Total current liabilities 85,512 79,479 Deferred income taxes 4,404 4,445 Long-term debt, less current maturities 7,347 7,589 --------- --------- Common stock, $.25 par; 32,000,000 shares authorized: 9,158,975 and 9,153,766 shares issued and outstanding 2,290 2,284 Additional paid-in capital 1,540 1,438 Retained earnings 122,380 119,167 Cumulative translation adjustment 747 1,730 --------- --------- Total shareholders' investment 126,957 124,619 --------- --------- $ 224,220 $ 216,132 ========= ========= MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED) FOR THE 3 MONTHS ENDED DECEMBER 31 1997 1996 --------- --------- (expressed in 000's except for per share amounts) NET REVENUES $ 73,938 $ 66,841 COST OF REVENUES 43,699 39,750 --------- --------- Gross profit 30,239 27,091 OPERATING EXPENSES: Selling 12,346 12,703 General and administrative 5,201 4,523 Research and development 4,568 4,385 --------- --------- INCOME FROM OPERATIONS 8,124 5,480 Interest expense 226 323 Interest income (108) (105) Other (income) and expense, net 1,294 579 --------- --------- INCOME BEFORE INCOME TAXES 6,712 4,683 PROVISION FOR INCOME TAXES 2,400 1,462 --------- --------- NET INCOME $ 4,312 $ 3,221 ========= ========= BASIC EARNINGS PER SHARE $ 0.47 $ 0.35 WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 9,145 9,140 DILUTED EARNINGS PER SHARE $ 0.45 $ 0.34 WEIGHTED AVERAGE COMMON SHARES ASSUMING DILUTION 9,630 9,408 DIVIDENDS PER SHARE $ 0.12 $ 0.10 BACKLOG $ 166,900 $ 125,345 MTS SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AND 1996 (UNAUDITED)
FOR THE 3 MONTHS ENDED December 31 1997 1996 -------- -------- (expressed in $000's) OPERATING ACTIVITIES Net income $ 4,312 $ 3,221 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 2,212 1,989 Deferred income taxes 5 -- Changes in operating assets and liabilities that provide or (use) cash: Receivables, including accounts, unbilled contracts and retainages (4,549) (1,916) Inventories (4,046) (2,997) Prepaid expenses (463) (904) Advance billings to customers 3,732 (3,688) Other, net (6,721) (6,141) -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES (5,518) (10,436) -------- -------- INVESTING ACTIVITIES Property and equipment, net (4,834) (1,829) Purchase of Bregenhorn-Butow & Co., net of cash acquired -- (6,793) Other assets (42) (169) -------- -------- NET CASH (USED) IN INVESTING ACTIVITIES (4,876) (8,791) -------- -------- FINANCING ACTIVITIES Net borrowings (payments) on notes payable 10,226 13,920 Proceeds from issuance of long-term debt -- -- Payments on long-term borrowings (215) (179) Cash dividends (1,099) (915) Proceeds from employee stock option and stock purchase plans 294 161 Payments to purchase and retire common stock (186) (1,917) -------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 9,020 11,070 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (3) (394) -------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS (1,377) (8,551) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 10,285 19,231 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,908 $ 10,680 ======== ========
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 denominated currency transactions and from foreign exchange hedge contracts 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 twelve 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 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, 1997 are expected to be invoiced within twelve months. OTHER FINANCIAL STATEMENT DISCLOSURES. The Notes to Consolidated Financial Statements appearing in the Company's September 30, 1997 Annual Report to Shareholders on pages 26 through 34 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. EARNINGS PER SHARE DATA. Statement of Financial Accounting Standards No. 128, "Earnings per Share" requires all companies whose capital structure includes convertible securities and options to provide dual presentation of basic and diluted earnings per share. The standard becomes effective with the quarter ended December 31, 1997. Prior year earnings per share have been restated to conform with the new standard. SUBSEQUENT EVENT. On December 3, 1997 the Company's Board of Directors declared a two-for-one stock split to be effected in the form of a one hundred percent stock dividend to shareholders of record on January 15, 1998. The distribution of stock will occur on or about February 2, 1998. Earnings per share and share data in the financial statements for the periods ended December 31, 1997 and 1996 have not been restated to reflect the split. ACQUISITION. In December, 1996 the Company acquired a majority of the stock of Bregenhorn-Butow & Co. of Freiburg, Germany (name subsequently changed to Custom Servo Motors Antriebstechnik GmbH & Co. KG), a privately held supplier of low power, electric servo motors and drives. The transaction involved cash and debt and has been accounted for by the purchase method of accounting. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS New Orders and Backlog New orders for the first quarter of fiscal 1998, ended December 31, 1997, were $69 million, the same as the comparable quarter in fiscal 1996. Orders from international customers were 44% of the total for the first quarter compared to 41% one year ago. Orders from Europe were strong, but Asian orders were considerably below last year's level. The Company expects that Asian order volumes for the remainder of the fiscal year will be lower than in prior years. Recovering economies in central and eastern Europe have shown strength during this quarter and offer prospects for order growth during the rest of the year. Order activity in the Mechanical Testing and Simulation (MT&S) sector was comparable with the prior year. Order activity in the Measurement and Automation Group (MAG) sector increased 4% over the same period a year ago. International customers accounted for 45% of MT&S sector orders compared to 42% one year ago. International orders were 40% of the MAG total in fiscal 1998 compared to 38% one year ago. The Backlog of undelivered orders at December 31, 1997 was $167 million, a decrease of 5% from record backlog at September 30, 1997 and an increase of 33% over the backlog one year ago. Results of Operations Record revenues for the first quarter were $74 million, an 11% increase from the same quarter one year ago. International revenue accounted for 46% and 51% of total revenue for the quarters ended in 1997 and 1996, respectively. MT&S sector revenues increased 13% over the first quarter one year ago. MAG revenues increased 3% over last year's first quarter. MT&S revenues accounted for 79 and 77% of total revenues for the quarters ended December 31, 1997 and 1996, respectively. Income before income taxes increased 43% to $6.7 million compared to $4.7 million for the quarter ended a year ago. The increase in pretax earnings results primarily from increased revenue in both sectors. Consolidated gross margin percents were 40.9% and 40.5% for the periods ended December 31, 1997 and 1996, respectively. This small change in gross margin percents leveraged by increased revenue contributed positively to income before income taxes for the quarter ended in 1997. Total operating expenses for the quarter increased $1 million over the first quarter ended in 1996 and partially offset the increase in gross margin, mentioned above. As a percent of sales, total operating expenses were 32% compared to 34% for the 1997 and 1996 quarters, respectively. Net income for the quarter was a record $4.3 million and represents a 32% increase over the comparable quarter one year ago. The effective tax rate for the quarter ended December 31, 1997 was 36% compared to 31% for the quarter ended in 1996 and 36% for the year ended September 30, 1997. Financial Condition and Liquidity The ratio of current assets to current liabilities at was 1.9 at both December 31, 1997 and September 30, 1997. Cash and cash equivalents decreased 13% to $8.9 million at December 31 compared to $10.3 million at September 30, 1997. The Company's borrowing under its $60 million in credit lines was $14.5 million at December 31 compared to $4.3 million at September 30, 1997. The increase in borrowing results from typical first quarter operating needs, capital expenditures and cash requirements for compensation plans and tax estimates. Capital expenditures, net of retirements for the first quarter totaled $4.8 million. The Company's total debt to equity ratio increased to 18% at December 31 from 10% at September 30, 1997 reflecting the borrowing needs discussed above. 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. ANNUAL SHAREHOLDERS' MEETING. The Annual Meeting of Shareholders was held on January 28, 1998 at the Company's headquarters in Eden Prairie, Minnesota. With shareholders voting 91% 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 approve an amendment to the Company's Amended and Restated Articles of Incorporation which increases the number of authorized shares of Common Stock from 32,000,000 to 64,000,000 shares. FORWARD LOOKING STATEMENTS. In this report the Company makes forward looking statements which reflect management's current expectations or beliefs. We caution our shareholders and other readers of this report that actual future results could differ materially from those in the forward looking statements depending upon many factors, some beyond our control, including factors related to Company competitive performance, industry conditions and international economic trends. 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, 1997. 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 17, 1998 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 8,908 0 99,914 2,036 47,433 158,841 112,294 59,308 224,220 85,512 8,115 0 0 2,290 124,667 224,220 73,938 73,938 43,699 22,115 1,186 300 226 6,712 2,400 6,712 0 0 0 4,312 .47 .45
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