EXHIBIT 99.1
[LOGO]
MTS Systems Corporation
14000 Technology Drive
Eden Prairie, MN 55344-2290
Telephone 952-937-4000
Fax 952-937-4515
NEWS RELEASE
FOR IMMEDIATE RELEASE For More Information Contact:
APRIL 21, 2003 Susan Knight, Chief Financial Officer
(952) 937-4000
Thomas Minneman, Treasurer
(952) 937-4647
MTS REPORTS SECOND QUARTER RESULTS, RAISES FULL YEAR OUTLOOK
Eden Prairie, Minn., April 21, 2003 - MTS Systems Corporation (Nasdaq: MTSC)
today reported net income from continuing operations of $6.4 million, or $0.30
per diluted share, for its second quarter ended March 29, 2003, compared to
the previously communicated estimate range of $0.23-$0.26. Associated with the
third quarter sale of its Automation division that was announced on March 31,
2003 and April 11, 2003, the Company recorded a one-time impairment loss on
discontinued operations of $2.4 million, net of taxes, or $0.11 per share.
After recognition of the impairment charge, the Company reported diluted
earnings per share of $0.19 compared to $0.24 in the second quarter of fiscal
2002. (A reconciliation of financial results before and after the impact of
discontinued operations is included in this release as Exhibit A.) Cash and
short-term investments increased approximately $19 million in the quarter,
driven by continued favorable working capital performance.
"We delivered operating profit above expectations for the quarter on strong
revenue performance, while further strengthening the balance sheet," said
Sidney W. Emery, Jr., Chairman and CEO. "The sale of the Automation division
enables the Company to increase its focus on the core businesses where we have
a breadth of long-term opportunities for profitable growth. While backlog is
down $22 million from the beginning of the year and we have recorded a
one-time impairment charge on discontinued operations, our forecast indicates
that we will be able to deliver improved earnings per share in the high
$0.80's to low $0.90's range for fiscal 2003, as compared to previous guidance
in the mid-$0.80's."
Second quarter orders, before the impact of discontinued operations, were
$86.8 million, slightly above the estimate range of $80-$85 million. Orders
from continuing operations were $78.8 million, a decrease of four percent
compared to orders of $81.9 million for second quarter of fiscal 2002. Backlog
for continuing operations decreased nine percent, from approximately $162
million to approximately $148 million.
Second quarter revenue, before the impact of discontinued operations, was
$100.6 million, exceeding the estimate range of $90-$95 million primarily due
to an increase in short-duration projects in the MT&S segment. Revenue from
continuing operations was $93.2 million, an increase of ten percent compared
to revenue of $84.7 million for second quarter of fiscal 2002.
The Company reported diluted earnings per share of $0.19 in the current year
quarter compared to $0.24 for second quarter of fiscal 2002. Year-over-year
earnings per share were favorably impacted by $0.10 from increased revenue
volume and $0.04 due to proceeds from penalties associated with a canceled
contract in the current year quarter, as well as the $0.08 impact of
Automation division inventory write-offs recorded in the prior year second
quarter. These favorable impacts were more
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than offset by negative impacts of $0.11 from the impairment charge on
discontinued operations and $.08 from margin rate decline due to product mix
in the current year quarter, as well as the $0.08 impact of a non-recurring
$2.6 million pre-tax gain on the sale of an investment recorded in the prior
year second quarter.
SEGMENT RESULTS
---------------
MECHANICAL TESTING AND SIMULATION SEGMENT (MT&S):
Orders for the MT&S segment were $65.7 million for the second quarter, down 9
percent compared to orders of $72.5 million for second quarter of fiscal 2002,
primarily due to continued weakness in the global automotive and industrial
markets. Backlog decreased approximately $14 million, or 9 percent, to
approximately $141 million. Second quarter revenue was $80.8 million, an
increase of 8 percent compared to $74.7 million for second quarter of fiscal
2002, driven by strong performance in the North American and European
automotive and motorsports markets. The MT&S gross margin rate was 34.4
percent, a decrease of 2.6 percentage points compared to 37.0 percent for
second quarter of fiscal 2002, primarily due to product mix. The segment
reported $7.2 million in operating earnings for the current year quarter
compared to $8.9 million for second quarter of fiscal 2002 due to lower margin
in the quarter and the timing of operating expenses, partially offset by
increased volume.
FACTORY AUTOMATION SEGMENT (FA):
In conjunction with the third quarter sale of its Automation division, the
Company recorded a loss on impairment of discontinued operations of $2.4
million, net of taxes, in the second quarter. Excluding the impairment charge,
the Company's discontinued operations reported effectively break-even
operating results for the current year quarter compared to an operating loss
of $2.6 million, net of taxes, for second quarter of fiscal 2002 due to
inventory write-offs. The carrying values of the Automation division's net
assets and liabilities included in total current assets and liabilities are
$11.5 million and $1.9 million, respectively.
Before the impact of discontinued operations, orders for the FA segment were
$21.1 million for the second quarter, an increase of 41 percent compared to
$15.0 million for second quarter of fiscal 2002. Orders from continuing
operations were $13.1 million, an increase of 39 percent compared to orders of
$9.4 million for second quarter of fiscal 2002. The Company's AeroMet business
was awarded a $1.5 million development contract from the U.S. government, and
orders in the Sensors business increased due to strong demand in Europe and
Japan. Backlog from continuing operations was flat at approximately $7
million. Before the impact of discontinued operations, revenue was $19.8
million, an increase of 13.8 percent compared to revenue of $17.4 million for
second quarter of fiscal 2002. Revenue from continuing operations was $12.4
million, an increase of 24 percent compared to revenue of $10.0 million for
second quarter of fiscal 2002. The FA gross margin rate from continuing
operations was 44.3 percent, a decrease of 3.4 percentage points compared to
gross margin of 47.7 percent for second quarter of fiscal 2002 due to product
mix and one-time costs associated with a canceled contract. Operating earnings
from continuing operations were $0.9 million compared to $0.5 million for
second quarter of fiscal year 2002, driven by favorable volume partially
offset by the decline in gross margin rate in the quarter.
SECOND QUARTER CONFERENCE CALL
------------------------------
A conference call will be held on Tuesday, April 22, at 11:00 a.m. CDT (Noon
EDT). Call +1-712-257-2476; state the Passcode "Second Quarter" and conference
leader "Chip Emery". Telephone re-play will be available through 6:00 p.m.
CDT, May 22, 2003. Call +1-402-220-4147 and state the Passcode "4006."
MTS News Release
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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 webcast will be archived through 6:00 p.m. (CDT), May 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.
(more)
MTS News Release
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MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited - in thousands of dollars, except per share data)
March 29, September 28,
2003 2002
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 59,228 $ 62,456
Short-term investments 53,997 35,094
Accounts receivable, net of allowances for doubtful accounts 55,844 59,943
Unbilled contracts and retainage receivable 29,813 32,276
Inventories 29,978 34,773
Prepaid expense 5,280 5,380
Current deferred tax asset 8,739 8,739
Other current assets 1,147 19
Assets of discontinued operations 11,548 15,311
--------- ---------
Total current assets 255,574 253,991
--------- ---------
Property and Equipment:
Land 3,247 3,247
Buildings and improvements 46,009 44,723
Machinery and equipment 83,298 79,679
Accumulated depreciation (75,657) (70,765)
--------- ---------
Total property and equipment, net 56,897 56,884
--------- ---------
Goodwill 4,329 4,268
Other assets 2,729 3,363
Non-current deferred tax asset 1,593 1,593
--------- ---------
Total Assets $ 321,122 $ 320,099
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable to banks $ 198 $ 598
Current maturities of long-term debt 6,828 8,605
Accounts payable 12,051 13,137
Accrued payroll-related costs 27,445 26,112
Advance payments from customers 43,376 37,209
Accrued warranty costs 5,035 4,482
Accrued income taxes 6,135 11,453
Other accrued liabilities 10,029 9,917
Liabilities of discontinued operations 1,879 1,462
--------- ---------
Total current liabilities 112,976 112,975
--------- ---------
Deferred income taxes 1,740 1,519
Long-term debt, less current maturities 36,325 42,790
Other long-term liabilities 584 550
--------- ---------
Total Liabilities 151,625 157,834
--------- ---------
Shareholders' Investment:
Common stock 5,268 5,302
Additional paid-in capital 8,101 9,770
Retained earnings 153,780 146,857
Accumulated other comprehensive income 2,348 336
--------- ---------
Total shareholders' investment 169,497 162,265
--------- ---------
Total Liabilities and Shareholders' Investment $ 321,122 $ 320,099
========= =========
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MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands of dollars, except per share data)
Three Months Ended Six Months Ended
---------------------- ----------------------
March 29, March 31, March 29, March 31,
2003 2002 2003 2002
--------- --------- --------- ---------
Revenue $ 93,236 $ 84,665 $ 177,675 $ 164,263
Cost of sales 59,916 52,215 113,049 101,197
--------- --------- --------- ---------
Gross profit 33,320 32,450 64,626 63,066
--------- --------- --------- ---------
Operating expenses:
Selling 13,817 12,694 26,352 25,873
General and administrative 7,290 5,874 13,441 12,202
Research and development 4,044 4,435 7,623 8,573
--------- --------- --------- ---------
Total operating expenses 25,151 23,003 47,416 46,648
--------- --------- --------- ---------
Income from continuing operations 8,169 9,447 17,210 16,418
--------- --------- --------- ---------
Interest expense 949 995 1,993 2,102
Interest income (617) (168) (1,104) (305)
(Gain) on sale of investments -- (2,630) -- (2,630)
Other expense (income), net (1,729) (435) (1,712) (1,698)
--------- --------- --------- ---------
Income before income taxes, discontinued operations,
and cumulative effect of accounting change 9,566 11,685 18,033 18,949
Provision for income tax 3,184 3,914 5,951 6,292
--------- --------- --------- ---------
Income before discontinued operations and
cumulative effect of accounting change 6,382 7,771 12,082 12,657
--------- --------- --------- ---------
Discontinued operations:
Loss from discontinued operations, net of tax (17) (2,608) (220) (3,781)
Impairment on discontinued operations, net of tax (2,402) -- (2,402) --
Cumulative effect of accounting change, net of tax -- -- -- (9,198)
--------- --------- --------- ---------
Loss from discontinued operations, net of tax (2,419) (2,608) (2,622) (12,979)
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change
on continuing operations 3,963 5,163 9,460 (322)
Cumulative effect of accounting change on continuing
operations, net of tax -- -- -- (4,523)
--------- --------- --------- ---------
Net income (loss) $ 3,963 $ 5,163 $ 9,460 $ (4,845)
========= ========= ========= =========
Earnings (loss) per share:
Basic-
Income before discontinued operations and cumulative
effect of accounting change $ 0.30 $ 0.37 $ 0.57 $ 0.60
Discontinued operations:
Loss from discontinued operations, net of tax 0.00 (0.12) (0.01) (0.18)
Impairment on discontinued operations, net of tax (0.11) 0.00 (0.11) 0.00
Cumulative effect of accounting change, net of tax 0.00 0.00 0.00 (0.44)
--------- --------- --------- ---------
Loss from discontinued operations, net of tax (0.11) (0.12) (0.12) (0.62)
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change
on continuing operations 0.19 0.25 0.45 (0.02)
Cumulative effect of accounting change, net of tax 0.00 0.00 0.00 (0.21)
--------- --------- --------- ---------
Earnings (loss) per share $ 0.19 $ 0.25 $ 0.45 $ (0.23)
========= ========= ========= =========
Weighted average number of common shares outstanding - basic 21,112 21,057 21,122 21,042
========= ========= ========= =========
Diluted-
Income before discontinued operations and cumulative
effect of accounting change $ 0.30 $ 0.36 $ 0.56 $ 0.59
Discontinued operations:
Loss from discontinued operations, net of tax 0.00 (0.12) (0.01) (0.18)
Impairment on discontinued operations, net of tax (0.11) 0.00 (0.11) 0.00
Cumulative effect of accounting change, net of taxes 0.00 0.00 0.00 (0.43)
--------- --------- --------- ---------
Loss from discontinued operations, net of tax (0.11) (0.12) (0.12) (0.61)
--------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change
on continuing operations 0.19 0.24 0.44 (0.02)
Cumulative effect of accounting change, net of tax 0.00 0.00 0.00 (0.21)
--------- --------- --------- ---------
Earnings (loss) per share $ 0.19 $ 0.24 $ 0.44 $ (0.23)
========= ========= ========= =========
Weighted average number of common shares outstanding - diluted 21,404 21,336 21,379 21,367
========= ========= ========= =========
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EXHIBIT A
MTS SYSTEMS CORPORATION
Discontinued Operations Reconciliation
(unaudited - in thousands of dollars)
Three Months Ended Six Months Ended
---------------------- ----------------------
MARCH 29, MARCH 31, MARCH 29, MARCH 31,
2003 2002 2003 2002
--------- --------- --------- ---------
ORDERS:
Before discontinued operations $ 86,782 $ 87,545 $ 168,541 $ 184,231
Discontinued operations 7,989 5,603 14,223 10,724
--------- --------- --------- ---------
Continuing operations 78,793 81,942 154,318 173,507
--------- --------- --------- ---------
BACKLOG:
Before discontinued operations $ 154,898 $ 161,038 $ 154,898 $ 161,038
Discontinued operations 6,721 $ 7,656 6,721 $ 7,656
--------- --------- --------- ---------
Continuing operations 148,177 153,382 148,177 153,382
--------- --------- --------- ---------
REVENUE:
Before discontinued operations $ 100,589 $ 92,075 $ 191,850 $ 179,239
Discontinued operations 7,353 7,410 14,175 14,976
--------- --------- --------- ---------
Continuing operations 93,236 84,665 177,675 164,263
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE:
Before discontinued operations $ 9,544 $ 7,434 $ 14,537 $ 12,780
Discontinued operations (22) (4,251) (3,496) (6,169)
--------- --------- --------- ---------
Continuing operations 9,566 11,685 18,033 18,949
--------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE:
Before discontinued operations $ 3,963 $ 5,163 $ 9,460 $ 8,876
Discontinued operations (2,419) (2,608) (2,622) (3,781)
--------- --------- --------- ---------
Continuing operations 6,382 7,771 12,082 12,657
--------- --------- --------- ---------