News Release

February 3, 2011

For More Information Contact:
Susan Knight, Chief Financial Officer


Ø Orders of $140 million rose 30 percent year over year, the second highest quarter for orders in MTS history; backlog reaches record high of $247 million

Ø Revenue of $106 million, gross margin of 44.1 percent and $0.86 earnings per share position the company for strong year-over-year growth in 2011

Eden Prairie, Minn. – February 3, 2011 – MTS Systems Corporation (NASDAQ: MTSC) today reported fiscal 2011 first quarter results.

“Certainly, we are delighted with our first quarter results, which exceeded our expectations. Numerous factors, including higher beginning backlog, robust Q1 orders, and strong short cycle mix, combined to deliver exciting top and bottom line growth,” said Laura B. Hamilton, chief executive officer and chair. “Much of the strength that we experienced late in fiscal 2010 in areas such as Test ground vehicles and Sensors Europe, continued into the first quarter.”

Hamilton continued, “Our history demonstrates that MTS’ results are impacted by economic changes and, at the same time, that quarter-to-quarter results have the potential to significantly fluctuate in any economic condition. For the remainder of the year, the higher percentage of longer-cycle, custom projects currently in Test backlog, coupled with project development for growth initiatives like Wind, will contribute to some continued quarterly variability. Nevertheless, this is a highly positive and most welcomed start to 2011.”

First Quarter Results

Orders were $139.6 million, a 30 percent increase compared to the first quarter prior year. Test orders were up 29 percent and Sensors orders grew 35 percent. At $29 million, orders in excess of $5 million were up $9 million compared to the prior year. Orders growth reflects continued strength in the Test ground vehicles market and Sensors industrial market. Backlog sequentially increased 15 percent to $247 million.

Revenue was $105.9 million, up 19 percent compared to the prior year, including 15 percent growth in Test, and 37 percent growth in Sensors, both driven by higher beginning backlog and higher order volume. The gross margin rate was 44.1 percent, up 4.6 percentage points, due to favorable product mix, increased leverage resulting from higher volume, and reduced Test warranty expense.

Income from operations was $18.5 million, an improvement of $12.1 million compared to the prior year. The increase predominantly resulted from higher gross margin. Net earnings climbed to $0.86 per share, an increase of $0.63 compared to the prior year. In addition to margin growth, a lower tax rate from favorable U.S. tax legislation contributed $0.07 per share and a lower share count positively impacted earnings per share by $0.06.

Cash Position

Cash and cash equivalents at the end of the first quarter totaled $80.3 million, compared to $76.6 million at the end of fiscal 2010. During the first quarter, operating activities generated cash of $5.8 million and the company invested $2.3 million in capital expenditures.

On November 30, 2010, the company announced that its Board of Directors increased the quarterly cash dividend by 33 percent to $0.20 per share, reflecting management’s confidence in the company’s long-term market opportunities and ability to continue to generate strong operating cash flow.

Sequential Quarter Segment Results

Test Segment:

Orders were $115.8 million, up 29 percent compared to the prior year. Orders in the current quarter included two large ground vehicles orders totaling approximately $29 million while the first quarter prior year included two materials and structures orders totaling approximately $20 million. Excluding these large orders, base orders increased 24 percent from strong demand for ground vehicles durability, tire and vehicle-dynamics equipment. Currency translation unfavorably impacted orders by 2 percent. Backlog sequentially increased 16 percent to $230 million.

Revenue was $82.6 million, up 15 percent from higher beginning backlog. Currency translation unfavorably affected revenue by 1 percent.

Gross profit was $33.6 million, an increase of $7.8 million, or 30 percent, and the gross margin rate was 40.7 percent, an increase of 4.8 percentage points. Increased volume and lower warranty expense were the key drivers of the higher gross profit. Favorable product mix also contributed to the increase and was within normal quarterly variability.

Income from operations totaled $12.8 million, an increase of $9.6 million compared to the prior year, reflecting higher revenue and gross profit rate. Operating expenses declined 8 percent, primarily from lower legal expenses.

Sensors Segment:

Orders were $23.8 million, a 35 percent increase compared to the first quarter prior year, primarily driven by Europe and partially offset by 3 percent unfavorable impact of currency translation. Backlog remained flat sequentially at $16 million.

Revenue increased 37 percent to $23.3 million, similar to the orders growth rate and partially offset by 2 percent unfavorable impact of currency translation

Gross profit was $13.1 million, up $3.7 million or 40 percent driven by the significant growth in year over year revenue. The gross margin rate was 56.2 percent, an increase of 1.4 percentage points. Income from operations was $5.7 million, an increase of $2.5 million, due to higher gross profit.


Hamilton continued, “In comparison to a year ago, we are operating in a significantly better but still challenging environment. Our position today is the result of both an improved world-wide economy as well as actions we’ve taken over the last 18 months to ensure we came out of the recession a stronger company. Achieving our performance goals is not about hitting, or even exceeding, these goals in one quarter. It is about sustainable performance. Our first quarter 2011 financial performance is another step closer to our long term goals.

Assuming economic conditions remain relatively the same, the company now expects to exceed its revenue performance goal of 6-9% with year over year revenue growth expected in the mid-teens. With strong revenue growth, the company expects to achieve historical EBIT rates with return on invested capital (ROIC) nearing its long-term performance goal of greater than or equal to 20%.

First Quarter Conference Call

A conference call will be held on February 4, 2011, at 10 a.m. EST (9 a.m. CDT). Call +1-719-325-2466 (Toll Free: +1-877-572-7031); and reference the conference pass code “3926747.” Telephone re-play will be available until 12 p.m. CST, February 18, 2011. Call +1-719-457-0820 (Toll Free: +1-888-203-1112); and reference the conference pass code “3926747”.

A transcript of the call can also be accessed from the MTS website at: It will be available on February 11, 2011.

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.