MTS Systems (MTSC) 8-K Results of Operations and Financial Condition

Exhibit 99.1

	MTS Systems Corporation 14000 Technology Drive Eden Prairie, MN 55344-2290 Telephone 952-937-4000 Fax 952-937-4515
	News Release

FOR IMMEDIATE RELEASE
April 25, 2007 For More Information Contact: Susan Knight, Chief Financial Officer
(952) 937-4000 Paul Runice, Treasurer
(952) 937-4003

MTS Reports Second Quarter EPS of $0.56, Raises Full Year Guidance

Eden Prairie, Minn., April 25, 2007 – MTS Systems Corporation (NASDAQ: MTSC) today reported second quarter earnings of $0.56 per diluted share on net income of $10.3 million, a decrease of 3 percent compared to earnings of $0.58 per diluted share on net income of $11.3 million for second quarter fiscal 2006.

“Revenue and earnings results for the second quarter were in line with our expectations,” said Sidney W. Emery, Jr., Chairman and CEO. “Orders growth of 19 percent was excellent, following 15 percent growth in the first quarter. The second quarter revenue and EPS reflect healthy operating performance in Test and robust worldwide growth in Sensors. Considering the solid first half results, together with our outlook for a strong second half of the year, we are raising our full year guidance. The revised outlook for fiscal 2007 revenue is $405-$415 million, compared to the previous outlook of $400-$410 million, and the revised outlook for EPS is $2.15-$2.25, versus our previously communicated guidance range of $2.10-$2.20.”

Second quarter orders totaled $97.0 million, an increase of 19 percent compared to orders of $81.5 million for second quarter fiscal 2006, primarily driven by Test segment orders in North America and Asia and worldwide growth in the Sensors segment, as well as an estimated $2.4 million favorable impact of currency translation. Backlog decreased 2 percent in the quarter, from $208 million to $204 million. This compares to backlog of $195 million at the end of second quarter fiscal 2006.

Revenue for the second quarter totaled $101.8 million, a 1 percent decrease compared to revenue of $102.9 million for second quarter fiscal 2006. This decrease was primarily due to decreased custom business in Test, partially offset by continued growth in Sensors and an estimated $3.4 million favorable impact of currency translation.

Gross profit for second quarter was $45.9 million, flat compared to gross profit of $45.8 million for second quarter fiscal 2006. Gross margin rate for the second quarter was strong, at 45.1 percent, compared to 44.5 percent for second quarter fiscal 2006. Margin associated with increased volume in Sensors offset the impact of unfavorable product mix in Test. Second quarter income from operations totaled $16.7 million, a decrease of 2 percent compared to income from operations of $17.1 million for second quarter fiscal 2006. This decrease in income from operations was primarily due to planned increases in sales, marketing and R&D spending.

Second quarter net income was $10.3 million, a decrease of 9 percent compared to net income of $11.3 million for second quarter fiscal 2006. This decrease was driven by lower income from operations and a $1.1 million unfavorable impact of foreign currency transaction losses. Reduced shares outstanding positively impacted earnings per diluted share by $0.03 for the quarter.

Cash, cash equivalents and short-term investments at the end of the second quarter totaled $117 million, compared to $115 million at the end of first quarter 2007. The Company generated positive operating cash flow of $31.3 million in the second quarter, of which $23.8 million was used to purchase approximately 600,000 shares of the Company’s common stock.

MTS News Release

Page 2

Segment Results

Test Segment:

Second quarter orders for the Test segment were $77.3 million, an increase of 19 percent compared to orders of $65.1 million for second quarter fiscal 2006, reflecting an increase in North America and Asia and an estimated $1.5 million favorable impact of currency translation, partially offset by decreased volume in Europe. Orders included one large custom order in excess of $5 million. Backlog decreased 3 percent in the quarter, from $200 million to $195 million. Second quarter revenue was $82.9 million, a decrease of 5 percent compared to $87.0 million for second quarter fiscal 2006, reflecting decreased project revenue, partially offset by an estimated $2.6 million favorable impact of currency translation. Second quarter gross profit was $35.5 million, a decrease of 5 percent compared to $37.4 million for second quarter fiscal 2006, primarily due to decreased volume and unfavorable product mix, partially offset by an estimated $0.6 million favorable impact of currency translation. Income from operations for second quarter fiscal 2007 was $12.8 million, a decrease of 12 percent compared to income from operations of $14.6 million for second quarter fiscal 2006.

Sensors Segment:

Second quarter orders for the Sensors segment were $19.7 million, an increase of 20 percent compared to orders of $16.4 million for second quarter fiscal 2006, reflecting business growth in all geographies and an estimated $0.9 million favorable impact of currency translation. Backlog increased 13 percent in the quarter, from $8 million to $9 million. Second quarter revenue was $18.9 million, an increase of 19 percent compared to revenue of $15.9 million for second quarter fiscal 2006, driven by increased worldwide volume and an estimated $0.8 million favorable impact of currency translation. Second quarter gross profit was $10.4 million, an increase of 24 percent compared to $8.4 million for second quarter fiscal 2006, reflecting increased volume, improved capacity utilization, and an estimated $0.4 million favorable impact of currency translation. Income from operations for second quarter fiscal 2007 was $3.9 million, an increase of 56 percent compared to income from operations of $2.5 million for second quarter fiscal 2006, primarily due to increased gross profit, partially offset by planned increases in operating expenses.

Second Quarter Conference Call

A conference call will be held on Thursday, April 26, 2007, at 10:00 a.m. EDT (9:00 a.m. CDT). Call +1-706-634-9986; and state the Conference ID “5631947”. Telephone re-play will be available through 11:59 p.m. EDT, May 3, 2007. Call +1-706-645-9291.

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 11:59 p.m. EDT, July 24, 2007.

About MTS Systems Corporation

MTS Systems Corporation is a leading global supplier of test systems and industrial position sensors. The Company’s testing hardware, software and service 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 enhance control to improve the productivity and safety of fixed and mobile industrial equipment. MTS had 1,510 employees and revenue of $397 million for the fiscal year ended September 30, 2006. 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. In addition to the factors discussed above, other important risk factors are delineated in the Company’s most recent SEC Form 10-Q and 10-K filings.

MTS News Release

Page 3

MTS SYSTEMS CORPORATION

Consolidated Statements of Income

(unaudited - in thousands, except per share data)

	Three Months Ended						Six Months Ended
	March 31, 2007			April 1, 2006			March 31, 2006			April 1, 2006
Revenue:
Product	$	87,365		$	89,035		$	172,521		$	168,524
Service		14,465			13,833			28,365			26,187
Total revenue		101,830			102,868			200,886			194,711
Cost of sales:
Product		48,755			50,882			98,606			95,897
Service		7,206			6,205			14,303			12,464
Total cost of sales		55,961			57,087			112,909			108,361
Gross profit		45,869			45,781			87,977			86,350
Operating expenses:
Selling and marketing		17,293			15,933			34,232			31,937
General and administrative		7,810			8,896			15,823			17,000
Research and development		4,847			4,694			9,381			8,841
Total operating expenses		29,950			29,523			59,436			57,778
Gain on sale of assets		763			860			763			860
Income from operations		16,682			17,118			29,304			29,432
Interest expense		(331	)		(415	)		(669	)		(869	)
Interest income		958			782			1,883			1,464
Other (expense) income, net		(885	)		302			(810	)		327
Income before income taxes		16,424			17,787			29,708			30,354
Provision for income taxes		6,093			6,488			9,260			11,099
Net income	$	10,331		$	11,299		$	20,448		$	19,255
Earnings per share:
Basic-
Earnings per share	$	0.57		$	0.59		$	1.12		$	1.00
Weighted average number of common shares outstanding - basic		18,159			19,072			18,200			19,263
Diluted-
Earnings per share	$	0.56		$	0.58		$	1.10		$	0.97
Weighted average number of common shares outstanding - diluted		18,536			19,580			18,568			19,792

MTS News Release

Page 4

MTS SYSTEMS CORPORATION

Consolidated Balance Sheets

(unaudited - in thousands, except per share data)

	March 31, 2007			September 30, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	99,905		$	97,962
Short-term investments		17,490			23,575
Accounts receivable, net of allowances for doubtful accounts		65,471			72,997
Unbilled accounts receivable		36,125			27,132
Inventories		43,747			40,480
Prepaid expenses		4,284			3,180
Current deferred tax assets		5,430			5,134
Other current assets		499			1,065
Assets of discontinued operations		241			803
Total current assets		273,192			272,328
Property and Equipment:
Land		1,668			1,668
Buildings and improvements		43,291			42,072
Machinery and equipment		85,086			78,651
Accumulated depreciation		(82,987	)		(78,777	)
Total property and equipment, net		47,058			43,614
Goodwill		4,513			4,466
Other assets		3,385			2,102
Non-current deferred tax assets		1,801			1,613
Total Assets	$	329,949		$	324,123
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Notes payable	$	238		$	222
Current maturities of long-term debt		6,683			6,683
Accounts payable		18,933			17,090
Accrued payroll and related costs		24,769			29,273
Advance payments from customers		58,665			51,356
Accrued warranty costs		5,582			5,894
Accrued income taxes		5,013			512
Current deferred income taxes		5,093			4,643
Other accrued liabilities		11,894			15,125
Total current liabilities		136,870			130,798
Deferred income taxes		2,544			2,487
Long-term debt, less current maturities		7,837			8,990
Other long-term liabilities		13,728			12,527
Total Liabilities		160,979			154,802
Shareholders’ Investment:
Common stock, $.25 par; 64,000 shares authorized: 17,680 and 18,216 shares issued and outstanding		4,420			4,554
Retained earnings		149,199			152,657
Accumulated other comprehensive income		15,351			12,110
Total shareholders’ investment		168,970			169,321
Total Liabilities and Shareholders’ Investment	$	329,949		$	324,123

MTS News Release

Page 5

MTS SYSTEMS CORPORATION

Consolidated Statements of Cash Flows

(unaudited - in thousands)

	Three Months Ended						Six Months Ended
	March 31, 2007			April 1, 2006			March 31, 2007			April 1, 2006
Cash flows from operating activities:
Net income	$	10,331		$	11,299		$	20,448		$	19,255
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,018			1,971			3,949			3,869
Gain on sale of assets		(763	)		(860	)		(763	)		(860	)
Deferred income taxes		(13	)		—			(192	)		—
Bad debt provision		32			42			70			113
Stock-based compensation		1,309			1,226			2,624			2,142
Equity compensation income tax benefits		(381	)		(811	)		(539	)		(971	)
Changes in operating assets and liabilities:
Accounts and unbilled contracts receivable		3,034			(6,500	)		428			(14,759	)
Inventories		(2,072	)		(2,323	)		(2,597	)		(2,261	)
Prepaid expenses		95			(1,234	)		(1,525	)		(3,522	)
Other assets		1,135			795			(2,188	)		406
Accounts payable		2,337			512			1,634			1,447
Accrued payroll and related costs		4,085			4,300			(3,548	)		(5,864	)
Advance payments from customers		8,608			(8,917	)		6,561			9,171
Accrued warranty costs		(184	)		(563	)		(412	)		(825	)
Other current liabilities		1,725			2,505			2,975			5,374
Operating activities of discontinued operations		8			(380	)		546			(463	)
Net cash provided by operating activities		31,304			1,062			27,471			12,252
Cash flows from investing activities:
Additions to property and equipment		(3,954	)		(2,326	)		(5,840	)		(3,939	)
Proceeds from maturity of short-term investments		21,885			54,277			29,385			90,632
Purchases of short-term investments		(16,250	)		(23,125	)		(23,300	)		(37,007	)
Net proceeds from sale of businesses		1,000			400			1,000	��		(90	)
Net cash provided by investing activities		2,681			29,226			1,245			49,596
Cash flows from financing activities:
Net proceeds under short-term borrowings		3			71			15			53
Payments of long-term debt		(1,154	)		(1,162	)		(1,154	)		(1,178	)
Equity compensation income tax benefits		381			811			539			971
Cash dividends		(4,036	)		(1,865	)		(6,062	)		(3,856	)
Proceeds from exercise of stock options and employee stock purchase plan		1,763			2,096			2,358			2,600
Payments to purchase and retire common stock		(23,784	)		(37,331	)		(25,869	)		(59,508	)
Net cash used in financing activities		(26,827	)		(37,380	)		(30,173	)		(60,918	)
Effect of exchange rate on changes in cash		860			1,501			3,400			86
Net increase (decrease) in cash and cash equivalents		8,018			(5,591	)		1,943			1,016
Cash and cash equivalents, at beginning of period		91,887			89,750			97,962			83,143
Cash and cash equivalents, at end of period	$	99,905		$	84,159		$	99,905		$	84,159
Supplemental disclosure of cash flow information:
Cash paid during the period for -
Interest expense	$	272		$	392		$	546		$	785
Income taxes	$	4,139		$	1,990		$	4,963		$	7,207