News Release

November 18, 2010

For More Information Contact:
Susan Knight, Chief Financial Officer


Ø Orders rose 37 percent sequentially to $129 million, including one $6 million order; backlog sequentially increased 14 percent to $214 million

Ø Revenue of $106 million and EPS of $0.54 per share exceeded previously communicated ranges, reflecting strong execution in Test and a continuation of Sensors’ excellent performance

Ø 2010 full year performance positions company for growth in 2011

Eden Prairie, Minn. – November 18, 2010 – MTS Systems Corporation (NASDAQ: MTSC) today reported fiscal 2010 fourth quarter results.

“We are pleased with MTS’ fourth quarter improvement in orders, backlog, revenue and earnings compared with third quarter,” said Laura B. Hamilton, chief executive officer and chair. “Both businesses performed very well. During the period, MTS benefited from a number of factors including solid execution, improved order levels and favorable business mix in Test and continued outstanding performance in Sensors.”

Sequential Quarter Results

Orders were $128.7 million, a 37 percent increase compared to third quarter 2010. Test orders were up 47 percent and Sensors orders rose 4 percent. The results for both quarters included one large Test order of approximately $6 million. The increase in base orders was led by strength in the Test ground vehicles market, wind energy growth in the structures market and a broad based increase in the materials market. Backlog increased 14 percent to $214 million.

Revenue was $105.9 million, an increase of 25 percent compared to the previous quarter, including a 31 percent gain in Test and a 5 percent increase in Sensors, both primarily from improved conversion of backlog into revenue. Test had experienced some resource constraints in the late spring and summer, which MTS resolved in the fourth quarter, enabling the company to convert backlog to revenue. Gross profit was $44.8 million, up 35 percent compared to the prior quarter. The gross margin rate was 42.3 percent, up 3.2 percentage points, driven primarily by favorable product mix and increased leverage resulting from higher volume in Test. This was partially offset by $1.4 million of severance charges associated with the elimination of approximately 50 U.S. positions in Test.

Income from operations was $13.3 million, compared to a loss of $1.5 million in the prior quarter. The change from net loss to net income reflected higher revenue and margin, as well as $3.3 million lower operating expenses due to a $6.3 million pre-tax legal settlement charge, or $0.24 per share, in the prior quarter. Net earnings were $0.54 per share compared to $0.00 per share last quarter.

Cash Position

Cash and cash equivalents at the end of the fourth quarter totaled $76.6 million, compared to $104.7 million at the end of the third quarter. Working capital requirements largely offset cash from earnings. Additionally, the Company invested $2.8 million in capital expenditures, paid $2.3 million in dividends and purchased approximately 992,500 shares of its common stock for $27.5 million during the quarter.

Sequential Quarter Segment Results

Test Segment:

Orders were $106.1 million, up 47 percent compared to the prior quarter, due to an increase in worldwide base orders and a 3 percent favorable impact of currency translation. Approximately half or $17 million of the growth was in the ground vehicle market as demand for durability and tire equipment increased in the quarter. As noted above, orders in both the current and prior quarters included one large custom order of approximately $6 million. Backlog increased 14 percent to $198 million. Revenue was $84.4 million, up 31 percent. Currency translation favorably impacted revenue by 2 percent.

Gross profit was $32.7 million, an increase of $11.2 million, or 52 percent, and the gross margin rate was 38.7 percent, a gain of 5.4 percentage points. This resulted from favorable product mix and increased leverage from higher volume, partially offset by the previously mentioned severance charges.

Income from operations was $8.4 million, compared to a loss from operations of $6.7 million in the prior quarter. The change from operating loss to income reflects higher revenue and gross profit rate, and lower operating expenses resulting from the previously mentioned legal settlement charge in the prior quarter.

Sensors Segment:

Orders were $22.6 million, a 4 percent increase compared to the prior quarter, primarily due to a favorable impact of currency translation. Backlog was up 13 percent to $16 million. Revenue increased 5 percent to $21.5 million from higher beginning backlog in the quarter and a favorable impact of currency translation. Gross profit was $12.1 million, up $0.4 million or 4 percent. The gross margin rate was 56.6 percent, a decrease of 1.1 percentage points.

Income from operations was $4.9 million, a decrease of $0.3 million, due to higher operating expenses, partially offset by higher gross profit.

Full Year Results

Hamilton said, “We’re very pleased that orders were up 24 percent year over year, reflecting the improvement in the economy and progress in our growth initiatives. As a long cycle company, revenue was expected to lag orders but we managed to hold the decline to 9 percent. EPS on a reported basis was up 11 percent, with both years including significant non-operating costs. We managed costs to minimize the volume impact this year.”

Hamilton continued, “In the context of a year in which economic conditions were – and remain – capable of producing varying degrees of upside opportunity and downside risk, our second half fiscal 2010 results demonstrate our performance strengths and establishes a good starting point for fiscal 2011. The work we have done over the past year to further position MTS in high-opportunity geographies and applications was instrumental in helping us navigate this initial stretch of economic recovery and enables us to meet the challenges ahead.”

Fiscal Year 2011 Outlook

In a stable economic environment, the company’s long-term performance goals are to achieve a 5-year compounded annual revenue growth in the range of 6 to 9 percent with bottom line growth exceeding top line growth. In addition, the expectation for return on invested capital (ROIC) is to achieve rates which are greater than or equal to 20%. If economic conditions remain steady through 2011, the company expects to achieve its revenue and earnings performance goals and make measurable progress toward historical profitability and ROIC rates.

Hamilton concluded, “Global economic recovery is expected to be a long process which requires flexibility, responsiveness and vision. As we enter 2011, uncertainty remains regarding the world economy but our investments in growth geographies, like China, and in key end markets such as wind and mobile hydraulics, combined with our technology leadership and commitment to cost competitiveness, position us to capture opportunities as they arise and be successful in 2011 and over the long term.”

Fiscal Year 2010 Conference Call

A conference call will be held on November 19, 2010, at 10 a.m. EDT (9 a.m. CDT). Call +1-719-325-4878 (Toll Free: +1-877-857-6161); and reference theconference pass code “3828436.” Telephone re-play will be available until 12 p.m. CDT, November 26, 2010. Call +1-719-457-0820 (Toll Free: +1-888-203-1112); and reference the conference replay pass code “3828436.”

A transcript of the call can also be accessed from the MTS website at: It will be available on November 29, 2010.

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 1,948 employees and revenue of $374 million for the fiscal year ended October 2, 2010. Additional information on MTS can be found on the worldwide web at

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.