News Release

FOR IMMEDIATE RELEASE
November 15, 2007

For More Information Contact:
Susan Knight, Chief Financial Officer
(952) 937-4000
Paul Runice, Treasurer
(952) 937-4003

MTS Reports Fiscal 2007 EPS Increased 12% to $2.29
Forecasting Continuing Growth in Fiscal 2008


Eden Prairie, Minn. – November 15, 2007 – MTS Systems Corporation (NASDAQ: MTSC) today reported fourth quarter earnings per diluted share of $0.64, an increase of 3 percent compared to earnings per diluted share of $0.62 for fourth quarter fiscal 2006. Fiscal year 2007 net income was $42.0 million, or $2.29 per diluted share, an increase of 7 percent and 12 percent, respectively, compared to net income of $39.3 million, or $2.04 per diluted share, for fiscal 2006.

“As expected, for the fifth consecutive year, MTS delivered earnings per share growth at a faster rate than revenue growth,” said Sidney W. Emery, Jr., Chairman and Chief Executive Officer. “Outstanding results by the Sensors segment, a lower tax rate and a reduced share count all contributed to the continuation of this performance in fiscal 2007. Test segment orders rebounded during the year, contributing to the Company’s 6 percent revenue growth and a 7 percent increase in opening backlog for fiscal 2008.”

Fourth quarter orders totaled $109.7 million, up a solid 9 percent over orders of $100.8 million in the comparable period in fiscal 2006, while revenue totaled $111.1 million versus $106.2 million in the fourth quarter of fiscal 2006, an increase of 5 percent.

"Based on a continuing strong outlook in the Sensors segment and the higher opening backlog in the Test segment, we expect fiscal 2008 revenue growth of approximately 6 percent, resulting in a full year projection of $440 million to $450 million, and earnings per share in the $2.43 to $2.53 range,” Emery said. “This outlook anticipates ongoing spending on our strategic priorities and our expectation of growing market share globally in both segments.”

Fourth Quarter Results

Fourth quarter reflected worldwide orders growth in the Sensors segment, increased custom orders in the Test segment in Asia, as well as an estimated $3.2 million favorable impact of currency translation. Backlog remained unchanged from the third quarter at $206 million.

Revenue in the fourth quarter was driven by growth in the Sensors segment and an estimated $3.3 million favorable impact of currency translation.

Gross profit in the fourth quarter was $47.4 million, compared to $45.3 million for fourth quarter fiscal 2006. This increase was primarily due to higher volume and increased operational efficiency in the Sensors segment, reduced warranty and performance-based compensation expense in the Test segment, and an estimated $0.8 million favorable impact of currency translation, partially offset by unfavorable product mix and additional custom project costs in the Test segment. The fourth quarter gross margin rate was 42.7 percent, flat compared to fiscal 2006.

Income from operations for the quarter totaled $14.5 million, down slightly compared to income from operations of $14.7 million for fourth quarter fiscal 2006, as planned increases in sales, marketing, and R&D spending to support strategic initiatives more than offset the increase in gross profit for the quarter. There was no significant impact on income from operations from currency translation. Fourth quarter income before discontinued operations was $11.5 million, or $0.64 per diluted share, an increase of 4 percent compared to fourth quarter fiscal 2006 income before discontinued operations of $11.1 million, or $0.60 per diluted share. This increase was driven by reduced income tax expense resulting from the enactment of favorable tax legislation in the quarter.

Net income for the quarter totaled $11.5 million, a slight decrease compared to fourth quarter fiscal 2006 net income of $11.6 million. Fourth quarter diluted earnings per share of $0.64 increased approximately 3 percent compared to fourth quarter fiscal 2006 earnings per diluted share of $0.62. The increase was driven by higher income before discontinued operations and a $0.02 positive per share impact of reduced share count, partially offset by a $0.02 positive per share impact of income from discontinued operations in the fourth quarter of fiscal year 2006.

Cash, cash equivalents and short-term investments at the end of the fourth quarter totaled $121 million, compared to $104 million at the end of third quarter of fiscal year 2007. Cash flows from operations provided cash totaling $27.4 million in the quarter, primarily due to strong earnings and reduced working capital requirements. The Company purchased approximately 184,000 shares of common stock for $7.8 million in the quarter.

Full Year Results

Fiscal 2007 orders were $430.1 million, an increase of 14 percent compared to $376.9 million for fiscal 2006, primarily driven by Test segment orders in Asia and worldwide growth in the Sensors segment, as well as an estimated $9.1 million favorable impact of currency translation. Backlog increased 7 percent in the fiscal year, to $206 million from $192 million.

Fiscal 2007 revenue was $420.5 million, an increase of 6 percent compared to $396.8 million for fiscal 2007. This increase was driven by higher standard product and service business in the Test segment, continued growth in the Sensors segment across all geographies, and an estimated $11.6 million favorable impact of currency translation, partially offset by a decrease in custom business in the Test segment.

Gross profit for fiscal 2007 was $178.2 million, compared to $172.7 million for fiscal 2006. This increase was primarily due to higher volume in both segments, increased operating efficiency in the Sensors segment, and an estimated $3.4 million favorable impact of currency translation, partially offset by unplanned custom project costs and unfavorable product mix in the Test segment. The fiscal 2007 gross margin rate was 42.4 percent, a decrease of 1.1 percentage points compared to 43.5 percent for fiscal 2006. The decrease was primarily driven by unfavorable product mix and additional custom project costs in the Test segment, which was partially offset by operating efficiencies in the Sensors segment.

Fiscal 2007 income from operations was $55.5 million, down slightly compared to fiscal 2006, as planned increases in sales, marketing, and R&D spending to support strategic initiatives more than offset the increase in gross profit for the year and an estimated $1.0 million favorable impact of currency translation. Fiscal 2007 net income was $42.0 million, or $2.29 per diluted share, an increase of 7 percent compared to fiscal 2006 net income of $39.3 million, or $2.04 per diluted share. This increase was driven by reduced income tax expense of $3.7 million, resulting from the enactment of favorable tax legislation and research and development tax credits, as well as $0.7 million favorable net interest and an estimated $0.9 million favorable impact of currency translation, partially offset by $1.3 million unfavorable impact of foreign currency transaction losses.

Cash, cash equivalents and short-term investments at the end of the fiscal 2007 were $121 million, compared to $122 million at the end of fiscal year 2006. Cash flows from operations provided cash totaling $44.9 million during the year, primarily due to strong earnings, partially offset by increased working capital requirements. Over the full year, the Company invested $12.7 million in capital expenditures and purchased approximately 967,000 shares of common stock for $38.2 million.

Segment Results


Test Segment:

Test segment orders were $87.5 million for fourth quarter fiscal 2007, an increase of 5 percent compared to orders of $83.2 million for fourth quarter fiscal 2006, reflecting an increase in Europe and Asia and an estimated $2.4 million favorable impact of currency translation. During the fourth quarter of fiscal 2007, the Company booked one large custom order of approximately $7 million, and cancelled one large custom order of approximately $10 million. Backlog decreased 1 percent in the quarter, from $196 million to $194 million. Fourth quarter revenue was $90.2 million, an increase of 1 percent compared to $89.5 million for fourth quarter fiscal 2006. The increase was primarily due to an estimated $2.4 million favorable impact of currency translation, partially offset by decreased custom project revenue.

Fourth quarter gross profit was $35.5 million, or 39.4 percent, compared to $36.3 million, or 40.6 percent, for fourth quarter fiscal 2006, primarily due to unfavorable product mix and additional custom project costs, partially offset by decreased warranty and performance based compensation expense and an estimated $0.4 million favorable impact of currency translation.

Income from operations for fourth quarter fiscal 2007 was $10.4 million, a decrease of 9 percent compared to income from operations of $11.4 million for fourth quarter fiscal 2006. This decrease was primarily due to lower gross profit and planned increases in sales, marketing, and R&D spending to support strategic initiatives. There was no significant impact on income from operations from currency translation.

Test segment orders for fiscal 2007 totaled $349.3 million, an increase of 12 percent compared to orders of $310.7 million for fiscal 2006, reflecting an increase in Asia and an estimated $6.3 million favorable impact of currency translation. Fiscal 2007 orders included five large custom orders which aggregated approximately $40 million. Backlog increased 5 percent during the year, from $184 million to $194 million. Fiscal 2007 revenue was $343.6 million, an increase of 3 percent compared to $332.6 million for fiscal 2006, driven by an increase in standard product and service business and an estimated $8.7 million favorable impact of currency translation.

Fiscal 2007 gross profit was $135.5 million, or 39.4 percent, compared to $138.2 million, or 41.6 percent, for fiscal 2006, due to unfavorable product mix and additional custom project costs, partially offset by increased volume, and an estimated $1.9 million favorable impact of currency translation.

Income from operations for fiscal 2007 was $40.7 million, a decrease of 9 percent compared to $44.7 million for fiscal 2006. This decrease was primarily due to lower gross profit and planned increases in selling, marketing, and R&D for strategic initiatives, partially offset by an estimated $0.3 million favorable impact of currency translation.

Sensors Segment:

Sensors segment orders were $22.2 million for fourth quarter fiscal 2007, an increase of 26 percent compared to orders of $17.6 million for fourth quarter fiscal 2006, due to continued growth in all geographies, and an estimated $0.8 million favorable impact of currency translation. Backlog increased 20 percent in the quarter, from $10 million to $12 million. Fourth quarter revenue was $20.9 million, an increase of 25 percent compared to revenue of $16.7 million for fourth quarter fiscal 2006, driven by increased worldwide volume and an estimated $0.9 million favorable impact of currency translation.

Fourth quarter gross profit was $11.9 million, or 56.9 percent, compared to $9.0 million, or 53.9 percent, for fourth quarter fiscal 2006, reflecting increased volume and improved operational efficiency.

Income from operations for fourth quarter fiscal 2007 was $4.1 million, an increase of 24 percent compared to income from operations of $3.3 million for fourth quarter fiscal 2006, primarily due to increased gross profit, and an estimated $0.2 million favorable impact of currency translation, partially offset by planned increases in operating expenses to support strategic initiatives.

Sensor segment orders for fiscal 2007 were $80.8 million, an increase of 22 percent compared to orders of $66.2 million for fiscal 2006, reflecting increased worldwide growth and an estimated $2.8 million favorable impact of currency translation. Backlog increased 50 percent during the year, from $8 million to $12 million. Fiscal 2007 revenue was $76.9 million, an increase of 20 percent compared to $64.2 million for fiscal 2006, driven by increased worldwide volume and an estimated $2.9 million favorable impact of currency translation.

Fiscal 2007 gross profit was $42.7 million, or 55.5 percent, compared to $34.5 million, or 53.7 percent, for fiscal 2006, primarily due to increased volume and improved operational efficiency, and an estimated $1.5 favorable impact of currency translation.

Income from operations for fiscal 2007 was $14.8 million, an increase of 33 percent compared to income from operations of $11.1 million for fiscal 2006, primarily due to increased gross profit and an estimated $0.7 million favorable impact of currency translation, partially offset by planned increases in operating expenses to support strategic initiatives.

Fiscal Year 2007 Earnings Release and Conference Call

A conference call will be held on Friday, November 16, at 10:00 a.m. EST (9:00 a.m. CST). Call +1-719-325-4830; and state the Conference ID “7429571.” Telephone re-play will be available through 11:59 p.m. EST, November 23, 2007. Call +1-719-457-0820.

If you prefer to listen live over the Internet, please log on to the web at http://www.mts.com/en/InvestorRelations/events/index.asp and click on the webcast event notice. The webcast will be archived through 11:59 p.m. EST, January 21, 2008.

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 1,618 employees and revenue of $421 million for the fiscal year ended September 29, 2007. 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. A list of important risk factors are delineated in the Company’s most recent SEC Form 10-Q and 10-K filings.