2014

MTS Reports Fiscal 2012 First Quarter Financial Results - Company posts both record revenue of $134 million and record EPS of $0.98

- Strong expansion in base orders (those under $5 million) of 22 percent. Total orders decline 3 percent, reflecting year-over-year variability in volume of large orders

- Company increases previous fiscal 2012 growth outlook

EDEN PRAIRIE, Minn., Feb. 2, 2012 /PRNewswire/ -- MTS Systems Corporation (NASDAQ: MTSC) today reported fiscal 2012 first quarter financial results.

"MTS continues to benefit from our leadership position in emerging geographies and our focus in technology application areas with promising growth potential" said interim Chief Executive Officer William V. Murray. "We posted record revenue and earnings per share during the first quarter of 2012 and, importantly, also realized a significant rise in base orders that are the core of our business. The prevailing global economic uncertainty requires vigilance, but I am pleased with the momentum we have sustained into fiscal 2012. Our order opportunity pipeline and backlog are healthy, our margins are in the historically high ranges, and near-term growth catalysts, such as technology evolution and regulatory mandates, remain strong."

First Quarter Results

For the sixth quarter in a row, orders exceeded $115 million, totaling $134.8 million in the fiscal first quarter. Base orders rose 22 percent, reflecting continued growth in the Test business. There were no large orders ( >$5 million) in the quarter, while fiscal 2011 first quarter results included two large orders totaling approximately $29 million. Orders of that size can result in quarter-to-quarter fluctuations. Sensors orders increased 1 percent. Backlog is at a record high, increasing 18 percent compared to the prior year.

Revenue was $133.7 million, up 26 percent compared to the prior year, including 32 percent growth in Test, and a 7 percent gain in Sensors. Strong growth in Test standard products and higher beginning backlog drove the increase. The gross margin rate remained high at 43.9 percent, but was relatively flat compared to last year's first quarter, reflecting a generally lower-margin product mix, offset by expense leverage from higher volume.

Income from operations totaled $23.5 million, up 27 percent compared to the prior year. The gain resulted from higher gross margin on increased volume. Operating expense as a percentage of revenue declined 1 percent from a year ago to 26 percent, but rose $7.0 million, principally due to planned investments in productivity initiatives and research and development.

Net earnings were $0.98 per share, compared to $0.86 per share in the prior year, reflecting higher income from operations, partially offset by a higher tax rate. The tax rate for the quarter rose to 33.4 percent from 26.6 percent primarily due to the benefit received from the enactment of favorable U.S. tax legislation in fiscal 2011 first quarter.

Cash Position

Cash and cash equivalents at the end of the first quarter totaled $103.7 million, compared to $104.1 million at the end of fiscal 2011. During the first quarter, operating activities generated cash of $2.5 million. The company paid $4.0 million in dividends and invested $2.3 million in capital expenditures. The company's strong financial condition continues to provide MTS with the flexibility to invest in initiatives intended to enhance both top- and bottom-line financial performance.

Segment Results

Test Segment:

Excluding large orders, base orders increased 28 percent driven by continued demand for new capital equipment and upgrades driven by product performance requirements and regulatory mandates. Total orders for the Test segment were $110.7 million, down 4 percent compared to the prior year. As noted above, prior-year orders included two large orders totaling approximately $29 million. Base orders for the Ground Vehicles, Materials and Structures markets grew 20 percent, 22 percent and 67 percent, respectively. Backlog was a record high $275 million, 20 percent above the first quarter of fiscal 2011.

Revenue grew 32 percent to $108.6 million, reflecting higher beginning backlog and strong standard product orders. Currency translation enhanced revenue by 1 percent.

Gross profit was $44.7 million, an increase of $11.1 million, or 33 percent versus the prior year, and the gross margin rate was 41.2 percent, an increase of 0.5 percentage points. The higher gross margin rate resulted from both volume leverage and lower warranty expense, partially offset by an overall lower-margin mix of custom project revenue.

Income from operations totaled $17.7 million, an increase of $4.9 million compared to the prior year, driven by higher revenue and gross profit rate. Operating expenses increased by $6.1 million, primarily due to higher spending in research and development and productivity initiatives. Operating expense as a percentage of revenue was 25 percent, flat compared to the prior year.

Sensors Segment:

Orders were $24.1 million, a 1 percent increase compared to the prior year. Mobile Hydraulics was up 34 percent, driven by demand in the Americas. Industrial market demand was down 4 percent primarily due to large customer order timing in Europe and Asia. Backlog decreased 4 percent to $16 million compared to the first quarter of fiscal 2011.

Revenue rose 7 percent to $25.1 million, as a result of shipments from backlog.

Gross profit was $14.0 million, up $0.9 million, or 7 percent, and the gross margin rate was 55.9 percent, essentially flat. Income from operations was $5.8 million, an increase of 1 percent, the result of higher gross profit, partially offset by higher operating expenses.

Outlook

Murray concluded, "Given the current global economic situation, we remain cautious as we move forward. But as we look ahead, we must also consider our strong first quarter which includes record backlog and a robust order pipeline for both segments. I believe our financial performance over the past few quarters reflects the importance our customers place on the solutions and products we deliver and that MTS is well positioned to win these market opportunities. Furthermore, we have a strong track record of successfully managing through economic uncertainty. Therefore, we are raising our revenue growth outlook for fiscal 2012 to the mid- to high-teens compared to our previous forecast of low double-digit revenue growth. Growth in earnings per share is dependent on revenue volume, but it is expected to be in the low to mid-teens, as we continue to make important investments in our future."

First Quarter Conference Call

A conference call will be held on February 3, 2012, at 10 a.m. EST (9 a.m. CST). Call +1-719-325-4837 (Toll Free: +1-877-857-6177); and reference the conference pass code "9874555." Telephone re-play will be available until 12 p.m. CST, February 10, 2012. Call +1-719-457-0820 (Toll Free: +1-888-203-1112); and reference the conference pass code "9874555".

A transcript of the call can also be accessed from the MTS website at http://www.mts.com/en/Investor/index.htm. It will be available on February 7, 2012.

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 2,003 employees and revenue of $467 million for the fiscal year ended October 1, 2011. 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. Words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements.

Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are risks related to: the Company's significant international business; volatility in the global economy; competition; failure to achieve the Company's growth plans for the expansion of its business; difficulties obtaining the services of skilled employees; failure to protect its intellectual property effectively or infringement upon the intellectual property of others; product liability and commercial litigation; difficulty obtaining materials or components for its products; government regulation; the irregularity and development of sales, delivery and acceptance cycle for the Company's products; the Company's customers are in cyclical industries; interest rate fluctuations; the Company may be required to recognize impairment charges for long-lived assets; an adverse outcome of the ongoing government investigation and proceedings that results in fines, penalties, or an extended suspension or debarment; and increased governmental and regulatory scrutiny or negative publicity resulting from the current investigation. For a more thorough discussion of the risks associated with our business, see the "Risk Factors" section in the Company's most recent SEC Form 10-K, 10-Q and 8-K filings. Except as required by law, 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.

MTS SYSTEMS CORPORATION

Consolidated Statements of Income

(unaudited - in thousands, except per share data)






Three Fiscal Months Ended


December 31,


January 1,


2011


2011





Revenue

$         133,697


$ 105,876

Cost of sales

74,984


59,204

Gross profit

58,713


46,672

Gross margin

43.9%


44.1%





Operating expenses:




Selling, general and administrative

30,205


25,070

Research and development

4,959


3,128

Total operating expenses

35,164


28,198





Income from operations

23,549


18,474

Operating margin

17.6%


17.4%





Interest expense, net

(206)


(427)

Other (expense) income, net

(23)


57





Income before income taxes

23,320


18,104

Provision for income taxes

7,781


4,815

Net income  

$            15,539


$   13,289





Earnings per share:




Basic-




Earnings per share

$                0.99


$        0.87

Weighted average number of common shares outstanding - basic  

15,681


15,305





Diluted-




Earnings per share

$                0.98


$        0.86

Weighted average number of common shares outstanding - diluted

15,832


15,526











MTS SYSTEMS CORPORATION

Consolidated Balance Sheets

(unaudited - in thousands, except per share data)






December 31,


October 1,


2011


2011

ASSETS








Current Assets:




Cash and cash equivalents

$       103,742


$104,095

Accounts receivable, net

104,096


82,510

Unbilled accounts receivable

51,137


54,554

Inventories

67,187


65,987

Other current assets

18,191


16,910

Total current assets

344,353


324,056





Property and equipment, net

56,161


56,252





Goodwill

16,197


16,027

Intangibles, net

25,799


25,843

Other assets

5,272


5,681

Total Assets

$       447,782


$427,859





LIABILITIES AND SHAREHOLDERS' INVESTMENT








Current Liabilities:




Short-term borrowings

$         40,240


$  40,285

Accounts payable

27,223


27,794

Advance payments from customers

74,566


63,307

Other accrued liabilities

57,330


64,228

Total current liabilities

199,359


195,614





Other long-term liabilities

21,413


21,397

Total Liabilities

220,772


217,011





Shareholders' Investment:




Common stock, $.25 par; 64,000 shares authorized:




     15,772 and 15,632 shares issued and outstanding as  




     of December 31, 2011 and October 1, 2011, respectively

3,943


3,908

Additional paid-in capital

10,535


5,319

Retained earnings

196,938


185,332

Accumulated other comprehensive income

15,594


16,289

Total shareholders' investment

227,010


210,848

Total Liabilities and Shareholders' Investment

$       447,782


$427,859







Exhibit A

MTS SYSTEMS CORPORATION

Segment Financial Information

(unaudited - in thousands)








Three Fiscal Months Ended




December 31,


January 1,



Test Segment

2011


2011


% Variance







Orders

$               110,727


$               115,807


-4%







Revenue

$               108,628


$                  82,542


32%

Cost of Sales

63,917


48,985


30%

Gross profit

44,711


33,557


33%

Gross margin

41.2%


40.7%









Operating expenses

26,938


20,804


29%







Income from operations

$                  17,773


$                  12,753


39%







Sensors Segment












Orders

$                  24,103


$                  23,812


1%







Revenue

$                  25,069


$                  23,334


7%

Cost of Sales

11,067


10,219


8%

Gross profit

14,002


13,115


7%

Gross margin

55.9%


56.2%









Operating expenses

8,226


7,394


11%







Income from operations

$                    5,776


$                    5,721


1%







Total Company












Orders

$               134,830


$               139,619


-3%







Revenue

$               133,697


$               105,876


26%

Cost of Sales

74,984


59,204


27%

Gross profit

58,713


46,672


26%

Gross margin

43.9%


44.1%









Operating expenses

35,164


28,198


25%







Income from operations

$                  23,549


$                  18,474


27%









SOURCE MTS Systems Corporation



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