MTS Reports 2009 Third Quarter Financial Results
EDEN PRAIRIE, Minn., July 22 /PRNewswire-FirstCall/ — MTS Systems Corporation (Nasdaq: MTSC) today reported fiscal 2009 third quarter financial results. “We are encouraged by the sequential improvement in orders this quarter. At the same time, our financial results support our view that we are in the midst of a fundamental market reset,” said Laura B. Hamilton, chief executive officer and chair. “Accordingly, we continue to take the steps necessary to both resize our business as well as invest in key growth areas as we look to the future. We remain confident we will continue to manage through this economic challenge and position ourselves for long term success.”
Third Quarter Results
On a sequential basis, orders increased 17 percent compared to second quarter 2009, driven by the Test organic business. Backlog decreased 7 percent to $163 million.
On a year-over-year basis, orders totaled $80.7 million, a decline of 31 percent, due to lower volume in the Test segment in the Americas and Europe, and lower volume in the Sensors segment across all geographies. This includes a 34 percent negative impact from the decline in the organic business and a 2 percent negative impact from currency translation, partially offset by a 5 percent benefit from SANS, our recently acquired Chinese subsidiary.
Revenue was $90.8 million, a decrease of 22 percent compared to the previous year. This includes a 21 percent decline in the Test organic business, a 38 percent decrease in the Sensors business and a 3 percent negative impact of currency translation, partially offset by a 6 percent benefit from SANS.
Gross profit was $34.6 million, down 27 percent compared to third quarter last year. The gross margin rate was 38.1 percent, 2.3 percentage points lower than in the prior year, driven by weaker volume and severance charges. SANS positively impacted the margin rate in the quarter by 0.2 percentage points.
Income from operations was $4.8 million, a decrease of 68 percent compared to the prior year. This was primarily driven by lower gross profit and the previously mentioned severance charges, partially offset by reduced operating expenses. Operating expenses decreased 8 percent, or $2.7 million. Excluding SANS, operating expenses were down 16 percent, or $5.3 million, resulting from a reduction in the number of employees and lower discretionary spending.
As previously announced, in the third quarter, MTS approved a plan for an additional capacity-related reduction in its workforce in response to the continued weakness in industrial capital spending. The actions impacted approximately 65 positions and resulted in a pretax severance charge of $1.2 million, or $0.05 per share. The year-to-date pre-tax severance charges totaled $4.0 million, or $0.17 per share. The Company also previously announced that, combined with these actions, it anticipates further workforce and cost reduction actions in the fourth quarter related to material sourcing and process and structure improvements. Combined, these actions will result in annual savings of $15-20 million for fiscal 2010.
Earnings from continuing operations decreased 70 percent to $0.19 per diluted share on income of $3.1 million. Lower income from operations and unfavorable net interest, primarily resulting from reduced interest rates in Europe, negatively impacted earnings from continuing operations by $0.42 and $0.06, respectively. Net income totaled $3.1 million, or $0.19 per diluted share, a decrease of 75 percent compared to the prior year. During the third quarter fiscal 2008, the Company sold the net assets of its Nano Instruments product line which resulted in a net gain from discontinued operations of $0.10 per diluted share.
Cash and cash equivalents at the end of the third quarter totaled $118.9 million, compared to $99.3 million at the end of the fiscal 2009 second quarter. Operating activities generated cash of $21.2 million in the third quarter. During the period, the Company invested $1.8 million in capital expenditures, paid $2.5 million in dividends and purchased approximately 126,000 shares of common stock for $2.7 million.
On a sequential basis, orders rose 23 percent compared to second quarter 2009, driven by a 27 percent increase in the organic business, partially offset by a 7 percent decrease in the SANS business. Also on a sequential basis, backlog decreased 8 percent to $153 million, which includes an 8 percent and 3 percent decline in the organic and SANS businesses, respectively.
On a year-over-year basis, orders for the Test segment were $65.5 million, a decrease of 29 percent. The organic business was down 33 percent due to lower volume across all geographies and a 3 percent unfavorable impact of currency translation, partially offset by a 7 percent increase from SANS. Third quarter fiscal 2008 orders included one large order (orders exceeding $5 million) totaling approximately $10 million. There were no such large orders in this quarter.
Revenue was $76.5 million, a decrease of 17 percent compared to last year. The organic business declined 21 percent, while SANS contributed 7 percent growth in the quarter. Currency translation unfavorably impacted revenue by 3 percent.
Gross profit was $26.9 million, a 20 percent reduction compared to last year. Third quarter gross margin rate was 35.2 percent, a decrease of 1.1 percentage points compared to the prior year. The organic business decreased 1.7 percentage points primarily resulting from lower volume and severance charges. SANS favorably impacted the gross margin rate by 0.6 percentage points.
Income from operations was $4.1 million, a year-over-year decrease of 60 percent. This includes a 75 percent decline in the organic business, primarily due to lower gross profit and severance charges, partially offset by reduced operating expenses. The organic business results include $1.0 million of severance charges. SANS broke even in the quarter.
On a sequential basis, orders decreased 3 percent compared to second quarter 2009 and backlog rose sequentially 11 percent to $10 million.
On a year-over-year basis, orders for the Sensors segment were $15.2 million, a decrease of 39 percent, due to lower volume across all geographies, including a 2 percent unfavorable impact of currency translation.
Revenue was $14.3 million, a decline of 42 percent from the prior year, driven by lower volume worldwide, and includes a 3 percent negative impact from currency translation.
Gross profit was $7.7 million, down 44 percent compared to last year. Third quarter gross margin rate was 54.0 percent, a decrease of 1.8 percentage points compared to third quarter fiscal 2008, resulting from lower volume.
Income from operations was $0.7 million, a decrease of 84 percent compared to third quarter fiscal 2008, due to lower gross profit partially offset by reduced operating expenses.
The Company reaffirmed the fiscal 2009 full-year revenue and EPS outlook provided last quarter which stated that, without a significant improvement in orders in the second half of the year, full-year revenue would be down approximately 10 to 15 percent and earnings per share would decline approximately 50 percent. The outlook excludes Q4 cost-reduction charges.
Hamilton concluded, “This changing environment continues to present MTS with exciting opportunities for future growth. This includes renewable energy and environmentally friendly technologies where we help further innovation and in emerging geographies where we help build capabilities. MTS is financially strong and well positioned to take advantage of these trends.”
Third Quarter Conference Call
A conference call will be held on July 23, 2009, at 10 a.m. EDT (9 a.m. CDT). Call +1-719-457-2703; and state the Conference passcode “5489858.” Telephone re-play will be available through July 30, 2009. 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/news/financial_news.htm and click on the webcast event notice. The webcast will be archived through November 18, 2009.
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 1,660 employees and revenue of $461 million for the fiscal year ended September 27, 2008. 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. Important risk factors are delineated in the Company’s most recent SEC Form 10-Q and 10-K filings.
MTS SYSTEMS CORPORATION Consolidated Statements of Income (unaudited - in thousands, except per share data) Three Months Ended Nine Months Ended June 27, June 28, June 27, June 28, 2009 2008 2009 2008 Revenue $90,779 $116,886 $315,040 $336,446 Cost of sales 56,175 69,640 194,702 199,904 Gross profit 34,604 47,246 120,338 136,542 Gross margin 38.1% 40.4% 38.2% 40.6% Operating expenses: Selling, general and administrative 25,597 28,299 80,512 83,631 Research and development 4,199 4,148 11,332 12,176 Total operating expenses 29,796 32,447 91,844 95,807 Income from operations 4,808 14,799 28,494 40,735 Operating margin 5.3% 12.7% 9.0% 12.1% Interest (expense) income, net (447) 944 (690) 2,161 Other income (expense), net 134 (416) (133) 416 Income before income taxes and discontinued operations 4,495 15,327 27,671 43,312 Provision for income taxes 1,346 4,342 7,323 10,701 Income before discontinued operations 3,149 10,985 20,348 32,611 Discontinued operations: (Loss) income from discontinued operations, net of tax - (686) 25 (417) Net gain on disposal of discontinued businesses, net of tax - 2,451 - 2,451 Income from discontinued operations, net of tax - 1,765 25 2,034 Net income $3,149 $12,750 $20,373 $34,645 Earnings per share: Basic- Income before discontinued operations $ 0.19 $ 0.64 $ 1.21 $ 1.86 Discontinued operations: Loss from discontinued operations, net of tax - (0.04) - (0.02) Net gain on disposal of discontinued businesses, net of tax - 0.14 - 0.14 Income from discontinued operations, net of tax - 0.10 - 0.12 Earnings per share $ 0.19 $ 0.74 $ 1.21 $ 1.98 Weighted average number of common shares outstanding - basic 16,741 17,150 16,839 17,484 Diluted- Income before discontinued operations $ 0.19 $ 0.64 $ 1.21 $ 1.84 Discontinued operations: Loss from discontinued operations, net of tax - (0.04) - (0.02) Net gain on disposal of discontinued businesses, net of tax - 0.14 - 0.14 Income from discontinued operations, net of tax - 0.10 - 0.12 Earnings per share $ 0.19 $ 0.74 $ 1.21 $ 1.96 Weighted average number of common shares outstanding - diluted 16,765 17,324 16,878 17,683
MTS SYSTEMS CORPORATION Consolidated Balance Sheets (unaudited - in thousands, except per share data) June 27, September 27, 2009 2008 ASSETS Current Assets: Cash and cash equivalents $118,942 $114,099 Accounts receivable, net 77,125 101,331 Unbilled accounts receivable 29,341 43,022 Inventories 49,764 46,135 Other current assets 15,859 18,030 Assets of discontinued operations 270 380 Total current assets 291,301 322,997 Property and equipment, net 57,258 50,534 Goodwill 16,135 1,668 Intangibles, net 22,131 4,363 Other assets 6,086 19,595 Total Assets $392,911 $399,157 LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings and current maturities of long-term debt $ 41,353 $ 26,646 Accounts payable 16,843 28,567 Advance payments from customers 50,772 64,979 Other accrued liabilities 64,239 65,201 Liabilities of discontinued operations 174 177 Total current liabilities 173,381 185,570 Other long-term liabilities 11,007 8,645 Total Liabilities 184,388 194,215 Shareholders' Investment: Common stock, $.25 par; 64,000 shares authorized: 16,672 and 16,976 shares issued and outstanding 4,168 4,244 Retained earnings 182,655 175,216 Accumulated other comprehensive income 21,700 25,482 Total shareholders' investment 208,523 204,942 Total Liabilities and Shareholders' Investment $392,911 $399,157
SOURCE MTS Systems Corporation