MTS Reports Third Quarter Results and Confirms 2003 EPS Guidance
EDEN PRAIRIE, Minn., July 22 -- MTS Systems Corporation today reported net income of $5.7 million, or $0.27 per diluted share, for its third quarter ended June 28, 2003, compared to net income of $3.3 million, or $0.15 per diluted share, for the third quarter of fiscal 2002, on flat revenue. Cash and short-term investments increased $32.5 million in the quarter, driven by continued favorable working capital performance in addition to proceeds from the sale of discontinued operations.
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"We delivered operating profit for the quarter in line with our expectations for the second half of the year, while further strengthening the balance sheet," said Sidney W. Emery, Jr., Chairman and CEO. "While orders were greater than anticipated, we see no significant near-term improvement in capital spending in our markets. We remain confident that MTS will deliver earnings per share in the high $0.80's to low $0.90's range for fiscal 2003."
Third quarter orders were slightly more than expected at $97.8 million, an increase of 5 percent compared to orders of $93.2 million for third quarter of fiscal 2002, with strength in Europe and Asia more than offsetting continued weakness in North America. Backlog increased approximately 14 percent in the quarter, from $148 million to $169 million.
Third quarter revenue was in line with expectations at $79.3 million, roughly flat with revenue of $79.7 million for third quarter of fiscal 2002.
Income before discontinued operations was $4.1 million, or $0.19 per diluted share, compared to income before discontinued operations of $3.4 million, or $0.16 per diluted share, for the third quarter of fiscal 2002. Associated with the third quarter sale of its Automation division, the Company recorded a gain on discontinued operations of $1.2 million, net of taxes, or $0.06 per share, in addition to $0.02 per share from operations of the discontinued businesses during the quarter.
Segment Results Test Segment (Formerly "Mechanical Testing & Simulation" Segment):
Orders for the Test segment were $85.7 million for the third quarter, up 4 percent compared to orders of $82.8 million for third quarter of fiscal 2002, primarily due to strength in the international motorsports and aerospace markets. The automotive and infrastructure markets continue to experience weak demand. Backlog increased 15 percent, from $141 million to approximately $162 million. Third quarter revenue was $66.7 million, a decrease of 4 percent compared to $69.3 million for third quarter of fiscal 2002, primarily due to lower backlog at the beginning of the quarter and the timing of new bookings during the quarter. The gross margin rate for the Test segment was 36.6 percent, a decrease of 0.5 percentage points compared to 37.1 percent for third quarter of fiscal 2002, due to product mix. The segment reported $6.1 million in income from operations, unchanged compared to the third quarter of fiscal 2002, on a 4 percent decline in revenue.
Industrial Segment (formerly "Factory Automation" Segment):
Orders for the Industrial segment were $12.1 million for the third quarter, an increase of 16 percent compared to orders of $10.4 million for third quarter of fiscal 2002. Orders for the Sensors business increased in both North America and Europe due to customer inventory replenishment and sales into new markets. Backlog remained flat in the quarter at approximately $7 million. Revenue was $12.6 million for the quarter, an increase of 21 percent compared to revenue of $10.4 million for third quarter of fiscal 2002, driven by European sales in the Sensors business and stronger development revenues associated with the AeroMet business. The Industrial gross margin rate was 50.1 percent, unchanged from third quarter of fiscal 2002. Income from operations was $1.1 million compared to $0.6 million for third quarter of fiscal year 2002, driven by improved volume and reduced operating expenses.
Third Quarter Conference Call
A conference call will be held on Wednesday, July 23, at 9:00 a.m. CDT (10:00 a.m. EDT). Call +1-773-756-4703; state the Passcode "Third Quarter" and conference leader "Chip Emery". Telephone re-play will be available through 5:00 p.m. CDT, August 22, 2003. Call +1-402-530-8077 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 Vcall webcast image. The call will be archived through 5:00 p.m. CDT, August 22, 2003.
About MTS Systems Corporation
MTS Systems Corporation is a global supplier of integrated simulation solutions that help customers accelerate and improve their design, development, and manufacturing processes. MTS supplies products for determining the mechanical behavior of materials, products and structures -- including computer-based testing and simulation systems, modeling and testing software, and consulting services -- as well as products for automating manufacturing processes. MTS had 1,900 employees and revenue from continuing operations of $327 million for the fiscal year ended September 28, 2002. 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 28, 2002.
MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited - in thousands of dollars, except per share data)
June 28, September 28,
2003 2002
ASSETS
Current Assets:
Cash and cash equivalents $99,034 $62,456
Short-term investments 46,696 35,094
Accounts receivable, net of
allowances for doubtful accounts 50,613 59,943
Unbilled contracts and retainage
receivable 27,215 32,276
Inventories 31,503 34,773
Prepaid expense 4,658 5,380
Current deferred tax asset 8,739 8,739
Other current assets 940 19
Assets of discontinued operations - 15,311
Total current assets 269,398 253,991
Property and Equipment:
Land 3,247 3,247
Buildings and improvements 47,276 44,723
Machinery and equipment 84,219 79,679
Accumulated depreciation (77,773) (70,765)
Total property and equipment, net 56,969 56,884
Goodwill 4,388 4,268
Other assets 2,477 3,363
Non-current deferred tax asset 1,593 1,593
Total Assets $334,825 $320,099
LIABILITIES AND SHAREHOLDERS'
INVESTMENT
Current Liabilities:
Notes payable $400 $598
Current maturities of long-term debt 6,831 8,605
Accounts payable 13,562 13,137
Accrued payroll-related costs 31,365 26,112
Advance payments from customers 43,962 37,209
Accrued warranty costs 5,036 4,482
Accrued income taxes 5,807 11,120
Other accrued liabilities 10,299 9,917
Liabilities of discontinued operations - 1,795
Total current liabilities 117,262 112,975
Deferred income taxes 1,881 1,519
Long-term debt, less current
maturities 36,044 42,790
Other long-term liabilities 926 550
Total Liabilities 156,113 157,834
Shareholders' Investment:
Common stock, $.25 par; 64,000,000
shares authorized: 21,172,000 and
21,208,000 shares issued and outstanding 5,293 5,302
Additional paid-in capital 8,589 9,770
Retained earnings 158,245 146,857
Accumulated other comprehensive income 6,585 336
Total shareholders' investment 178,712 162,265
Total Liabilities and Shareholders'
Investment $334,825 $320,099
MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands of dollars, except per share data)
Three Months Ended Nine Months Ended
June 28, June 30, June 28, June 30,
2003 2002 2003 2002
Revenue $79,312 $79,695 $256,987 $243,958
Cost of sales 48,573 48,872 161,622 150,069
Gross profit 30,739 30,823 95,365 93,889
Operating expenses:
Selling 12,951 12,611 39,303 38,779
General and administrative 6,637 7,988 20,078 19,895
Research and development 3,986 3,540 11,609 12,113
Total operating expenses 23,574 24,139 70,990 70,787
Income from operations 7,165 6,684 24,375 23,102
Interest expense 811 969 2,804 3,071
Interest income (660) (224) (1,764) (529)
Gain on sale of investments - - - (2,630)
Other expense (income), net 917 898 (795) (800)
Income before income taxes,
discontinued operations, and
cumulative effect of accounting
change 6,097 5,041 24,130 23,990
Provision for income tax 2,012 1,620 7,963 7,912
Income before discontinued
operations and cumulative effect
of accounting change 4,085 3,421 16,167 16,078
Discontinued operations:
Income (loss) from discontinued
operations, net of tax 419 (162) 199 (3,943)
Gain (loss) on sale of discontinued
businesses, net of tax 1,225 - (1,177) -
Cumulative effect of accounting
change, net of tax - - - (9,198)
Income (loss) from discontinued
operations, net of tax 1,644 (162) (978) (13,141)
Income before cumulative effect of
accounting change on continuing
operations 5,729 3,259 15,189 2,937
Cumulative effect of accounting
change on continuing operations,
net of tax - - - (4,523)
Net income (loss) $5,729 $3,259 $15,189 $(1,586)
Earnings (loss) per share:
Basic-
Income before discontinued
operations and cumulative
effect of accounting change $0.19 $0.16 $0.77 $0.76
Discontinued operations:
Income (loss) from discontinued
operations, net of tax 0.02 (0.01) 0.01 (0.19)
Gain (loss) on sale of discontinued
businesses, net of tax 0.06 0.00 (0.06) 0.00
Cumulative effect of accounting
change, net of tax 0.00 0.00 0.00 (0.44)
Income (loss) from discontinued
operations, net of tax 0.08 (0.01) (0.05) (0.63)
Income before cumulative effect of
accounting change on continuing
operations 0.27 0.15 0.72 0.13
Cumulative effect of accounting
change, net of tax 0.00 0.00 0.00 (0.21)
Earnings (loss) per share $0.27 $0.15 $0.72 $(0.08)
Weighted average number of common
shares outstanding - basic 21,049 21,123 21,098 21,069
Diluted-
Income before discontinued
operations and cumulative
effect of accounting change $0.19 $0.16 $0.76 $0.75
Discontinued operations:
Income (loss) from discontinued
operations, net of tax 0.02 (0.01) 0.01 (0.18)
Gain (loss) on sale of discontinued
businesses, net of tax 0.06 0.00 (0.06) 0.00
Cumulative effect of accounting
change, net of taxes 0.00 0.00 0.00 (0.43)
Income (loss) from discontinued
operations, net of tax 0.08 (0.01) (0.05) (0.61)
Income before cumulative effect of
accounting change on continuing
operations 0.27 0.15 0.71 0.14
Cumulative effect of accounting
change, net of tax 0.00 0.00 0.00 (0.21)
Earnings (loss) per share $0.27 $0.15 $0.71 $(0.07)
Weighted average number of common
shares outstanding - diluted 21,433 21,411 21,397 21,381
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