Exhibit 99.1
News Release
| FOR IMMEDIATE RELEASE | For More Information Contact: |
| July 21, 2004 | Susan Knight, Chief Financial Officer
(952)937-4000
Paul Runice, Treasurer
(952) 937-4003 |
MTS Reports Strong Third Quarter Revenue and Earnings Growth; Raises Full Year Outlook
Eden Prairie, Minn., July 21, 2004 – MTS Systems Corporation (NASDAQ: MTSC) today reported net income of $6.6 million, or $0.31 per diluted share, for its third quarter ended June 26, 2004, a 16 percent increase compared to net income of $5.7 million, or $0.27 per diluted share, for the third quarter of fiscal 2003. Third quarter income before discontinued operations of $6.6 million, or $0.31 per diluted share, increased 61 percent compared to prior year income before discontinued operations of $4.1 million, or $0.19 per diluted share.
Third quarter orders were $79.7 million, a decrease of 19 percent compared to orders of $97.8 million for the third quarter of fiscal 2003, primarily due to decreased Test segment volume in North America and Europe, partially offset by an increase in Industrial segment volume across all geographic areas. Fiscal 2003 results included a $10 million ground vehicle order that did not recur in fiscal 2004. Backlog decreased 6 percent in the quarter, from $216 million to $204 million, reflecting lower order volume.
Revenue for the third quarter was in line with the Company’s expectations at $91.5 million, an increase of 15 percent compared to revenue of $79.3 million for the third quarter of fiscal 2003. This increase was primarily due to project timing and approximately $3 million of favorable currency translation.
“MTS delivered solid revenue and earnings growth for the quarter, consistent with our guidance,” said Sidney W. Emery, Jr., Chairman and CEO. “Orders were at the low end of the expected range due to the lack of significant market recovery in the Test segment, particularly in North America. As a result, we anticipate revenue for the year will be at the low end of the $360-$370 million guidance range. However, given the strength of our earnings performance, we are raising our total year earnings per share outlook from $1.15-$1.20 to $1.18-$1.22. This includes planned investment in both business segments in the fourth quarter.”
Third quarter income from operations was $10.3 million, an increase of 43 percent compared to income from operations of $7.2 million for the third quarter of fiscal 2003, primarily driven by volume in both segments.
Cash flow provided by operations was approximately $9 million for the third quarter, driven by strong earnings. Cash and cash equivalents totaled $147 million at quarter-end, down from $161 million at the end of the second quarter, primarily due to $20.2 million of share repurchases.
MTS News Release
Page 2
Segment Results
Test Segment:
Orders for the Test segment were $64.4 million for the third quarter, down 25 percent compared to orders of $85.7 million for the third quarter of fiscal 2003, driven by decreased volume in both North America and Europe. Backlog decreased 6 percent, from $208 million to $196 million, primarily due to decreased orders. Third quarter revenue was $76.6 million, an increase of 15 percent compared to $66.7 million for the third quarter of fiscal 2003, primarily due to the timing of large custom projects. Gross profit as a percent of revenue was 38.8 percent, an increase of 2.2 percentage points compared to 36.6 percent for the third quarter of fiscal 2003, due to volume and productivity improvements. The segment reported $8.2 million in income from operations, an increase of 34 percent compared to $6.1 million for the third quarter of fiscal 2003.
Industrial Segment:
Orders for the Industrial segment were $15.3 million for the third quarter, an increase of 26 percent compared to orders of $12.1 million for the third quarter of fiscal 2003. This increase reflects higher demand in the Sensors and AeroMet businesses. Backlog was flat at $8 million. Revenue was $14.9 million for the third quarter, an increase of 18 percent compared to revenue of $12.6 million for the third quarter of fiscal 2003, driven by increased volume in the Sensors business. Gross profit as a percent of revenue was 48.4 percent, a decrease of 1.7 percentage points compared to 50.1 percent for the third quarter of fiscal 2003, primarily due to product mix. Income from operations was $2.1 million, an increase of 91 percent compared to income from operations of $1.1 million for the third quarter of fiscal 2003, driven by higher revenue.
Third Quarter Conference Call
A conference call will be held on Thursday, July 22, at 9:00 a.m. CDT (10:00 a.m. EDT). Call +1-773-756-4623; state the Passcode “Third Quarter” and conference leader “Chip Emery”. Telephone re-play will be available through 6:00 p.m. CDT, August 22, 2004. Call +1-203-369-0192 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 webcast image. The call will be archived through 6:00 p.m. CST, November 10, 2004.
About MTS Systems Corporation
MTS Systems Corporation is a global supplier of testing products that help customers accelerate and improve their design, development, and manufacturing processes. MTS products are used for determining the mechanical behavior of materials, products, and structures and include computer-based testing and simulation systems, modeling and testing software, and consulting services. The Company is also a leading manufacturer of industrial position sensors. MTS had 1,630 employees and revenue of $340 million for the fiscal year ended September 27, 2003. Additional information on MTS can be found on the worldwide web athttp://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 27, 2003 and subsequent Form 10-Q’s.
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MTS News Release
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MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited – in thousands, except per share data)
| Three Months Ended
| | Nine Months Ended
|
|---|
| June 26,
2004
| | June 28,
2003
| | June 26,
2004
| | June 28,
2003
|
|---|
| Revenue | | | $ | 91,528 | | $ | 79,312 | | $ | 264,398 | | $ | 256,987 | |
| Cost of sales | | | | 54,595 | | | 48,573 | | | 158,574 | | | 161,622 | |
|
| |
| |
| |
| |
| Gross profit | | | | 36,933 | | | 30,739 | | | 105,824 | | | 95,365 | |
|
| |
| |
| |
| |
Operating expenses: | | |
Selling | | | | 15,341 | | | 12,951 | | | 43,778 | | | 39,303 | |
| General and administrative | | | | 7,825 | | | 6,637 | | | 20,858 | | | 20,078 | |
| Research and development | | | | 3,468 | | | 3,986 | | | 10,529 | | | 11,609 | |
|
| |
| |
| |
| |
| Total operating expenses | | | | 26,634 | | | 23,574 | | | 75,165 | | | 70,990 | |
|
| |
| |
| |
| |
Income from operations | | | | 10,299 | | | 7,165 | | | 30,659 | | | 24,375 | |
|
| |
| |
| |
| |
Interest expense | | | | (765 | ) | | (811 | ) | | (2,148 | ) | | (2,804 | ) |
| Interest income | | | | 495 | | | 660 | | | 1,360 | | | 1,764 | |
| Other income (expense), net | | | | 580 | | | (917 | ) | | 1,904 | | | 795 | |
|
| |
| |
| |
| |
| Income before income taxes and discontinued operations | | | | 10,609 | | | 6,097 | | | 31,775 | | | 24,130 | |
| Provision for income taxes | | | | 3,981 | | | 2,012 | | | 11,029 | | | 7,963 | |
|
| |
| |
| |
| |
| Income before discontinued operations | | | | 6,628 | | | 4,085 | | | 20,746 | | | 16,167 | |
|
| |
| |
| |
| |
Discontinued operations: | | |
| Income from discontinued operations, net of tax | | | | — | | | 419 | | | — | | | 199 | |
| Income (loss) on sale of discontinued businesses, net of tax | | | | — | | | 1,225 | | | — | | | (1,177 | ) |
|
| |
| |
| |
| |
| Income (loss) from discontinued operations, net of tax | | | | — | | | 1,644 | | | — | | | (978 | ) |
|
| |
| |
| |
| |
| Net income | | | $ | 6,628 | | $ | 5,729 | | $ | 20,746 | | $ | 15,189 | |
|
| |
| |
| |
| |
Earnings per share: | | |
| Basic- | | |
| Income before discontinued operations | | | $ | 0.32 | | $ | 0.19 | | $ | 0.99 | | $ | 0.77 | |
| Discontinued operations: | | |
| Income from discontinued operations, net of tax | | | | — | | | 0.02 | | | — | | | 0.01 | |
| Income (loss) on sale of discontinued businesses, net of tax | | | | — | | | 0.06 | | | — | | | (0.06 | ) |
|
| |
| |
| |
| |
| Income (loss) from discontinued operations, net of tax | | | | — | | | 0.08 | | | — | | | (0.05 | ) |
|
| |
| |
| |
| |
| Earnings per share | | | $ | 0.32 | | $ | 0.27 | | $ | 0.99 | | $ | 0.72 | |
|
| |
| |
| |
| |
| Weighted average number of common shares outstanding - basic | | | | 20,735 | | | 21,049 | | | 20,869 | | | 21,098 | |
|
| |
| |
| |
| |
Diluted- | | |
| Income before discontinued operations | | | $ | 0.31 | | $ | 0.19 | | $ | 0.96 | | $ | 0.76 | |
| Discontinued operations: | | |
| Income from discontinued operations, net of tax | | | | — | | | 0.02 | | | — | | | 0.01 | |
| Income (loss) on sale of discontinued businesses, net of tax | | | | — | | | 0.06 | | | — | | | (0.06 | ) |
|
| |
| |
| |
| |
| Income (loss) from discontinued operations, net of tax | | | | — | | | 0.08 | | | — | | | (0.05 | ) |
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| |
| |
| |
| Earnings per share | | | $ | 0.31 | | $ | 0.27 | | $ | 0.96 | | $ | 0.71 | |
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| |
| |
| |
| Weighted average number of common shares outstanding - diluted | | | | 21,566 | | | 21,433 | | | 21,705 | | | 21,397 | |
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MTS News Release
Page 4
MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited – in thousands, except per share data)
| June 26,
2004
| | September 27,
2003
|
|---|
| ASSETS | | | | | | | | |
Current Assets: | | |
| Cash and cash equivalents | | | $ | 146,675 | | $ | 74,183 | |
| Short-term investments | | | | — | | | 58,560 | |
| Accounts receivable, net of allowances for doubtful accounts | | | | 67,196 | | | 59,637 | |
| Unbilled contracts and retainage receivable | | | | 26,401 | | | 21,939 | |
| Inventories | | | | 35,722 | | | 34,709 | |
| Prepaid expense | | | | 6,725 | | | 3,928 | |
| Current deferred tax asset | | | | 9,621 | | | 9,682 | |
| Other current assets | | | | 635 | | | 2,075 | |
|
| |
| |
| Total current assets | | | | 292,975 | | | 264,713 | |
|
| |
| |
Property and Equipment: | | |
| Land | | | | 2,478 | | | 3,247 | |
| Buildings and improvements | | | | 46,665 | | | 47,031 | |
| Machinery and equipment | | | | 87,677 | | | 84,834 | |
| Accumulated depreciation | | | | (83,715 | ) | | (78,908 | ) |
|
| |
| |
| Total property and equipment, net | | | | 53,105 | | | 56,204 | |
|
| |
| |
| Goodwill | | | | 4,429 | | | 4,383 | |
| Other assets | | | | 2,171 | | | 2,562 | |
| Non-current deferred tax asset | | | | 2,524 | | | 2,516 | |
|
| |
| |
| Total Assets | | | $ | 355,204 | | $ | 330,378 | |
|
| |
| |
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | | |
Current Liabilities: | | |
| Notes payable | | | $ | 1,537 | | $ | 383 | |
| Current maturities of long-term debt | | | | 6,845 | | | 6,839 | |
| Accounts payable | | | | 13,189 | | | 10,483 | |
| Accrued payroll-related costs | | | | 25,555 | | | 25,308 | |
| Advance payments from customers | | | | 52,112 | | | 40,456 | |
| Accrued warranty costs | | | | 6,287 | | | 4,862 | |
| Accrued income taxes | | | | 9,062 | | | 5,571 | |
| Other accrued liabilities | | | | 15,275 | | | 15,272 | |
|
| |
| |
| Total current liabilities | | | | 129,862 | | | 109,174 | |
|
| |
| |
Deferred income taxes | | | | 6,533 | | | 6,265 | |
| Long-term debt, less current maturities | | | | 29,195 | | | 30,487 | |
| Other long-term liabilities | | | | 9,267 | | | 8,346 | |
|
| |
| |
| Total Liabilities | | | | 174,857 | | | 154,272 | |
|
| |
| |
| Shareholders’ Investment: | | |
| Common stock, $.25 par; 64,000 shares authorized: | | |
| 20,348 and 20,720 shares issued and outstanding | | | | 5,087 | | | 5,180 | |
| Additional paid-in capital | | | | — | | | 1,534 | |
| Retained earnings | | | | 164,564 | | | 162,076 | |
| Accumulated other comprehensive income | | | | 10,696 | | | 7,316 | |
|
| |
| |
| Total shareholders’ investment | | | | 180,347 | | | 176,106 | |
|
| |
| |
| Total Liabilities and Shareholders’ Investment | | | $ | 355,204 | | $ | 330,378 | |
|
| |
| |
