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MTS Reports 2009 Fourth Quarter Financial Results
- 18 percent sequential orders increase; 3 percent sequential backlog increase
- As expected, EPS before discontinued operations decreased on a year-over-year basis to a loss of $0.18 per share on lower volume; severance charges totaled $0.33 per share
- $7 million operating cash flow from lower working capital utilization; $119 million cash position remains strong
- Fiscal 2009 cost-reduction actions to save net $21 million before taxes in fiscal 2010
EDEN PRAIRIE, Minn., Nov. 19 /PRNewswire-FirstCall/ -- MTS Systems Corporation (Nasdaq: MTSC) today reported fiscal 2009 fourth quarter results. "We are pleased to see another quarter of sequential order gains. However, the activity we are experiencing supports our view that the market has fundamentally reset at well below historical levels and we anticipate these levels to continue for the foreseeable future," said Laura B. Hamilton, chair and chief executive officer. "That said, we have taken aggressive yet measured steps over the past several quarters to help ensure that MTS is positioned to capitalize on the opportunities that a changing global market presents. The majority of our business is outside of the U.S. where there is more substantial near-term growth potential. We have worked quickly to adapt our formidable expertise in legacy markets, such as ground vehicles, to areas of emerging growth, such as renewable energy. We've also reduced our costs to improve MTS' ability to provide the best technology at increasingly competitive prices. While the timing for meaningful economic growth remains unclear, MTS has the people and the positioning to capitalize on these opportunities around the world."
(Logo: http://www.newscom.com/cgi-bin/prnh/20020430/MTSCLOGO)
Fourth Quarter Results
On a sequential basis, orders increased 18 percent compared to third quarter 2009, driven by higher order volume in both the Test and Sensors segments. The increase was affected by order timing and may not be an indication of order levels in future quarters. Backlog increased 3 percent to $168 million.
On a year-over-year basis, orders totaled $95.5 million, a decline of 17 percent, due to lower volume in the Test segment in the Americas and Europe, and lower volume in the Sensors segment across all geographies. This includes a 23 percent decline in the organic business, partially offset by a 6 percent increase from SANS.
Revenue was $93.8 million, a decrease of 24 percent compared to the previous year. This includes declines of 31 percent and 35 percent in the Test organic business and the Sensors business, respectively, partially offset by a 7 percent increase from SANS.
As previously announced, MTS initiated further workforce and cost reduction actions in the fourth quarter related to process and structure improvements and material sourcing. The actions impacted approximately 130 positions and resulted in a pretax severance charge of $8.1 million, or $0.33 per share, in the quarter. Combined with cost-reduction initiatives taken earlier in the year, the Company anticipates saving approximately a net $21 million before taxes in fiscal 2010.
Gross profit was $31.3 million, down 42 percent compared to fourth quarter last year. The gross margin rate was 33.3 percent, 10.0 percentage points lower than in the prior year. This was the result of lower volume and the previously mentioned severance charges, partially offset by a positive impact from SANS. The severance charges reduced the margin rate by 5.3 percentage points and SANS positively impacted the margin rate by 0.7 percentage points.
Loss from operations was $3.9 million, resulting from lower gross profit and the previously mentioned severance charges, which was partially offset by reduced selling, general and administrative expenses in the organic business. Excluding severance charges, selling, general and administrative expenses in the organic business were down 16 percent, or $4.6 million, resulting from a smaller workforce and lower discretionary spending.
Net earnings decreased 121 percent to a net loss of $0.18 per share compared to the prior year, driven by lower income from operations and higher net interest.
Cash Position
Cash and cash equivalents at the end of the fourth quarter totaled $118.9 million, flat compared to the end of the previous quarter and up 4 percent from the end of fiscal 2008. Operating activities generated cash of $6.9 million in the fourth quarter. During the period, the Company invested $2.1 million in capital expenditures, paid $2.5 million in dividends and purchased approximately 136,000 shares of common stock for $3.4 million.
Fourth Quarter Segment Results
Test Segment:
On a sequential basis, orders rose 21 percent compared to third quarter fiscal 2009, reflecting the impact of an extra week in the fourth quarter and order timing. Also on a sequential basis, backlog increased 2 percent to $157 million.
On a year-over-year basis, orders for the Test segment were $79.0 million, a decrease of 14 percent. The organic business was down 22 percent due to lower volume in the Americas and Europe, partially offset by increased volume in Asia and a 8 percent increase from SANS.
Revenue in the segment was $77.9 million, a decrease of 22 percent compared to last year. The organic business declined 31 percent, while SANS contributed 9 percent growth in the quarter.
Gross profit was $22.6 million, a 43 percent reduction compared to last year. Fourth quarter gross margin rate was 28.9 percent, a decrease of 10.9 percentage points. The organic business decreased 12.4 percentage points primarily resulting from lower volume, severance charges and higher warranty expense. The severance charges and higher warranty expense reduced the gross margin rate by 7.3 and 3.4 percentage points, respectively. Gross margin benefited from a favorable product mix and reduced variable compensation expense. SANS favorably impacted the gross margin rate by 1.5 percentage points.
Loss from operations was $4.9 million. This includes a 135 percent decline in the organic business, primarily due to lower gross profit and severance charges, partially offset by reduced variable compensation and other operating expenses. The organic business results include $7.2 million of severance charges and a $1.7 million reduction in variable compensation expense. SANS had operating income of $0.5 million in the quarter.
Sensors Segment:
On a sequential basis, orders increased 9 percent compared to third quarter fiscal 2009, reflecting the impact of an extra week in the fourth quarter compared to the previous quarter. Backlog rose sequentially 8 percent to $11 million. On a year-over-year basis, orders and revenue were down 29 percent and 35 percent, respectively, driven by lower worldwide demand. Gross profit was $8.7 million, down 38 percent compared to last year. Fourth quarter gross margin rate was 55.0 percent, a decrease of 2.4 percentage points compared to fourth quarter fiscal 2008, resulting from lower volume.
Income from operations was $1.0 million, a decrease of 82 percent compared to the prior year, due to lower gross profit and severance charges, partially offset by reduced variable compensation and other operating expenses. Income from operations includes $0.9 million of severance charges and a $0.3 million reduction in variable compensation expense.
Full Year Results
Combined orders for both segments for the 2009 fiscal year totaled $340.8 million, a decline of 30 percent compared to the prior year, due to lower volume across all geographies. Backlog decreased 29 percent in the fiscal year to $168 million. Revenue was $408.9 million, a decrease of 11 percent compared to the previous year. This includes declines of 10 percent in the Test organic business, 29 percent decrease in the Sensors business and a 2 percent negative impact from currency translation, partially offset by a 5 percent benefit from SANS. Pretax severance charges for the full year totaled $12.1 million, or $0.48 per share.
Net income for fiscal 2009 totaled $17.4 million, or $1.03 per diluted share, a decrease of 65 percent compared to the prior year. The decrease resulted from reduced volume, severance charges, increased warranty expense and higher net interest from increased borrowing. This was partially offset by reduced operating expenses in the organic business and a reduction in variable compensation expense. During fiscal 2008, the Company sold the net assets of its Nano Instruments product line which resulted in a net gain from discontinued operations of $0.12 per diluted share.
Fiscal Year 2010 Outlook
Regarding the fiscal year outlook, Hamilton continued, "We started fiscal year 2010 with the knowledge that backlog is down $67 million and last year's cost reduction actions will offset much of this operating margin decline. The current economic situation creates a broad range of possible outcomes for orders. Economic and competitive conditions, order timing, mix, and stimulus make accurate forecasting difficult at this time. We will keep you apprised of our progress on a quarterly basis."
Fiscal Year 2009 Conference Call
A conference call will be held on November 20, 2009, at 10 a.m. EDT (9 a.m. CDT). Call 9133120411; and state the Conference passcode "4972148." Telephone re-play will be available through March 19, 2010. Call 719-457-0820.
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 event notice. The webcast will be archived through March 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 SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
Three Months Ended Year Ended
------------------ -----------
October September October September
3, 2009 27, 2008 3, 2009 27, 2008
------- -------- ------- --------
Revenue $93,841 $124,069 $408,881 $460,515
Cost of sales 62,563 70,358 257,265 270,262
------ ------ ------- -------
Gross profit 31,278 53,711 151,616 190,253
------ ------ ------- -------
Gross margin 33.3% 43.3% 37.1% 41.3%
Operating expenses:
Selling, general and
administrative 30,188 28,629 110,700 112,260
Research and development 4,990 4,056 16,322 16,232
----- ----- ------ ------
Total operating expenses 35,178 32,685 127,022 128,492
------ ------ ------- -------
(Loss) income from operations (3,900) 21,026 24,594 61,761
------ ------ ------ ------
Operating margin -4.2% 16.9% 6.0% 13.4%
Interest (expense) income, net (226) 789 (916) 2,950
Other income, net 333 333 225 749
--- --- --- ---
(Loss) income before income
taxes and discontinued
operations (3,793) 22,148 23,903 65,460
Income tax (benefit) provision (814) 7,649 6,509 18,350
---- ----- ----- ------
(Loss) income before
discontinued operations (2,979) 14,499 17,394 47,110
------ ------ ------ ------
Discontinued operations:
Income (loss) from
discontinued operations,
net of tax - 49 - (368)
Net (loss) gain on disposal
of discontinued businesses,
net of tax - (2) - 2,449
--- --- --- -----
Income from discontinued
operations, net of tax - 47 - 2,081
--- --- --- -----
Net (loss) income $(2,979) $14,546 $17,394 $49,191
======= ======= ======= =======
(Loss) earnings per share:
Basic-
(Loss) income before
discontinued operations $(0.18) $ 0.86 $ 1.04 $ 2.72
Discontinued operations:
Loss from discontinued
operations, net of tax - - - (0.02)
Net gain on disposal of
discontinued businesses,
net of tax - - - 0.14
--- --- --- ----
Income from discontinued
operations, net of tax - - - 0.12
--- --- --- ----
(Loss) earnings per share $(0.18) $ 0.86 $ 1.04 $ 2.84
====== ====== ====== ======
Weighted average number of
common shares
outstanding - basic 16,656 16,953 16,793 17,351
====== ====== ====== ======
Diluted-
(Loss) income before
discontinued operations $(0.18) $ 0.85 $ 1.03 $ 2.68
Discontinued operations:
Loss from discontinued
operations, net of tax - - - (0.02)
Net gain on disposal of
discontinued businesses,
net of tax - - - 0.14
--- --- --- ----
Income from discontinued
operations, net of tax - - - 0.12
--- --- --- ----
(Loss) earnings per share $(0.18) $ 0.85 $ 1.03 $ 2.80
====== ====== ====== ======
Weighted average number
of common shares
outstanding - diluted 16,656 17,126 16,823 17,544
====== ====== ====== ======
MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited - in thousands, except per share data)
October 3, September 27,
2009 2008
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $118,885 $114,099
Accounts receivable, net 72,553 101,331
Unbilled accounts receivable 27,246 43,022
Inventories 47,969 46,135
Other current assets 18,905 18,410
------ ------
Total current assets 285,558 322,997
------- -------
Property and equipment, net 56,118 50,534
Goodwill 15,206 1,668
Intangibles, net 23,826 4,363
Other assets 6,206 19,595
----- ------
Total Assets $386,914 $399,157
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings and current maturities
of long-term debt $40,182 $26,646
Accounts payable 18,630 28,567
Advance payments from customers 46,739 64,979
Other accrued liabilities 62,441 65,378
------ ------
Total current liabilities 167,992 185,570
------- -------
Other long-term liabilities 14,957 8,645
------ -----
Total Liabilities 182,949 194,215
------- -------
Shareholders' Investment:
Common stock, $.25 par; 64,000 shares
authorized: 16,564 and 16,976 shares
issued and outstanding 4,141 4,244
Retained earnings 174,301 175,216
Accumulated other comprehensive income 25,523 25,482
------ ------
Total shareholders' investment 203,965 204,942
------- -------
Total Liabilities and Shareholders'
Investment $386,914 $399,157
======== ========
Exhibit A
MTS SYSTEMS CORPORATION
Segment Financial Information
(unaudited - in thousands)
Three Months Ended Year Ended
------------------ ----------
October September October September
3, 27, % 3, 27, %
Test Segment 2009 2008 Variance 2009 2008 Variance
---- ---- -------- ---- ---- --------
Orders $78,993 $91,880 -14% $275,041 $389,803 -29%
------- ------- --- -------- -------- ---
Revenue $77,954 $99,672 -22% $342,595 $364,068 -6%
Gross profit 22,541 39,717 -43% 115,206 135,686 -15%
------ ------ --- ------- ------- ---
Gross margin 28.9% 39.8% -10.9% 33.6% 37.3% -3.6%
(Loss) income from
operations $(4,915) $15,449 -132% $17,494 $41,108 -57%
Sensors Segment
Orders $16,548 $23,279 -29% $65,798 $95,471 -31%
------- ------- --- ------- ------- ---
Revenue $15,887 $24,397 -35% $66,286 $96,447 -31%
Gross profit 8,737 13,994 -38% 36,410 54,567 -33%
----- ------ --- ------ ------ ---
Gross margin 55.0% 57.4% -2.4% 54.9% 56.6% -1.6%
Income from
operations $1,015 $5,577 -82% $7,100 $20,653 -66%
Total Company
Orders $95,541 $115,159 -17% $340,839 $485,274 -30%
------- -------- --- -------- -------- ---
Revenue $93,841 $124,069 -24% $408,881 $460,515 -11%
Gross profit 31,278 53,711 -42% 151,616 190,253 -20%
------ ------ --- ------- ------- ---
Gross margin 33.3% 43.3% -10.0% 37.1% 41.3% -4.2%
(Loss) income from
operations $(3,900) $21,026 -119% $24,594 $61,761 -60%
Severance Charge Summary
(unaudited - in thousands)
Three Months Ended Year Ended
October 3, October 3,
Test Segment 2009 2009
---- ----
Cost of sales $4,993 $6,531
Selling, general and
administrative 2,165 4,311
----- -----
Total severance charges $7,158 $10,842
====== =======
Sensors Segment
Cost of sales $- $239
Selling, general and
administrative 793 849
Research and development 155 155
--- ---
Total severance charges $948 $1,243
==== ======
Total Company
Cost of sales $4,993 $6,770
Selling, general and
administrative 2,958 5,160
Research and development 155 155
--- ---
Total severance charges $8,106 $12,085
====== =======
SOURCE MTS Systems Corporation
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