Susan Knight, Chief Financial Officer
(952) 937-4000
Paul Runice, Treasurer
(952) 937-4003
MTS Reports Third Quarter Results and Confirms 2003 Guidance
Eden Prairie, Minn., July 22, 2003 - MTS Systems Corporation (NASDAQ: MTSC) today reported net income of $5.7 million, or $0.27 per diluted share, for its third quarter ended June 28, 2003, compared to net income of $3.3 million, or $0.15 per diluted share, for the third quarter of fiscal 2002, on flat revenue. Cash and short-term investments increased $32.5 million in the quarter, driven by continued favorable working capital performance in addition to proceeds from the sale of discontinued operations.
"We delivered operating profit for the quarter in line with our expectations for the second half of the year, while further strengthening the balance sheet," said Sidney W. Emery, Jr., Chairman and CEO. "While orders were greater than anticipated, we see no significant near-term improvement in capital spending in our markets. We remain confident that MTS will deliver earnings per share in the high $0.80's to low $0.90's range for fiscal 2003."
Third quarter orders were slightly more than expected at $97.8 million, an increase of 5 percent compared to orders of $93.2 million for third quarter of fiscal 2002, with strength in Europe and Asia more than offsetting continued weakness in North America. Backlog increased approximately 14 percent in the quarter, from $148 million to $169 million.
Third quarter revenue was in line with expectations at $79.3 million, roughly flat with revenue of $79.7 million for third quarter of fiscal 2002.
Income before discontinued operations was $4.1 million, or $0.19 per diluted share, compared to income before discontinued operations of $3.4 million, or $0.16 per diluted share, for the third quarter of fiscal 2002. Associated with the third quarter sale of its Automation division, the Company recorded a gain on discontinued operations of $1.2 million, net of taxes, or $0.06 per share, in addition to $0.02 per share from operations of the discontinued businesses during the quarter.
Segment Results
Test Segment (Formerly "Mechanical Testing & Simulation" Segment):
Orders for the Test segment were $85.7 million for the third quarter, up 4 percent compared to orders of $82.8 million for third quarter of fiscal 2002, primarily due to strength in the international motorsports and aerospace markets. The automotive and infrastructure markets continue to experience weak demand. Backlog increased 15 percent, from $141 million to approximately $162 million. Third quarter revenue was $66.7 million, a decrease of 4 percent compared to $69.3 million for third quarter of fiscal 2002, primarily due to lower backlog at the beginning of the quarter and the timing of new bookings during the quarter. The gross margin rate for the Test segment was 36.6 percent, a decrease of 0.5 percentage points compared to 37.1 percent for third quarter of fiscal 2002, due to product mix. The segment reported $6.1 million in income from operations, unchanged compared to the third quarter of fiscal 2002, on a 4 percent decline in revenue.
Orders for the Industrial segment were $12.1 million for the third quarter, an increase of 16 percent compared to orders of $10.4 million for third quarter of fiscal 2002. Orders for the Sensors business increased in both North America and Europe due to customer inventory replenishment and sales into new markets. Backlog remained flat in the quarter at approximately $7 million. Revenue was $12.6 million for the quarter, an increase of 21 percent compared to revenue of $10.4 million for third quarter of fiscal 2002, driven by European sales in the Sensors business and stronger development revenues associated with the AeroMet business. The Industrial gross margin rate was 50.1 percent, unchanged from third quarter of fiscal 2002. Income from operations was $1.1 million compared to $0.6 million for third quarter of fiscal year 2002, driven by improved volume and reduced operating expenses.
Third Quarter Conference Call
A conference call will be held on Wednesday, July 23, at 9:00 a.m. CDT (10:00 a.m. EDT). Call +1-773-756-4703; state the Passcode "Third Quarter" and conference leader "Chip Emery". Telephone re-play will be available through 5:00 p.m. CDT, August 22, 2003. Call +1-402-530-8077 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 Vcall webcast image. The call will be archived through 5:00 p.m. CDT, August 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.
