United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
| x | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Quarterly period ended March 27, 2004 |
or
| o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________ |
_________________
Commission File Number 0-2382
MTS SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
| MINNESOTA | 41-0908057 | ||
| (State or other jurisdiction of | (I.R.S. Employer | ||
| incorporation or organization) | Identification No.) | ||
14000 Technology Drive, Eden Prairie, MN 55344 | |||
| (Address of principal executive offices) (Zip Code) | |||
Registrant’s telephone number: (952) 937-4000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
X Yes No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):
X Yes No
The number of shares outstanding of the Registrant’s common stock as of May 4, 2004 was 21,174,764 shares.
| Page No. | |||||
|---|---|---|---|---|---|
| PART I — FINANCIAL INFORMATION | |||||
Item 1. |
Financial Statements (unaudited) |
||||
Consolidated Balance Sheets as of | |||||
| March 27, 2004 and September 27, 2003 | 2 | ||||
Consolidated Statements of Income for the | |||||
| Three and Six Months Ended March 27, 2004 and March 29, 2003 | 3 | ||||
Consolidated Statements of Cash Flows for the | |||||
| Six Months Ended March 27, 2004 and March 29, 2003 | 4 | ||||
Condensed Notes to Consolidated Financial Statements | 5 - 11 | ||||
Item 2. | Management’s Discussion and Analysis of Financial | ||||
| Condition and Results of Operations | 11 - 18 | ||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risks | 19 | |||
Item 4. | Controls and Procedures | 19 | |||
PART II — OTHER INFORMATION | |||||
Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 19 | |||
Item 4. | Submission of Matters to a Vote of Security Holders | 20 | |||
Item 6. | Exhibits and Reports on Form 8-K | 20 - 21 | |||
SIGNATURES |
21 | ||||
1
MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited — in thousands, except per share data)
| March 27, 2004 | September 27, 2003 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
Current Assets: | ||||||||
| Cash and cash equivalents | $ | 161,034 | $ | 74,183 | ||||
| Short-term investments | — | 58,560 | ||||||
| Accounts receivable, net of allowances for doubtful accounts | 65,040 | 59,637 | ||||||
| Unbilled contracts and retainage receivable | 22,397 | 21,939 | ||||||
| Inventories | 34,119 | 34,709 | ||||||
| Prepaid expense | 5,369 | 3,928 | ||||||
| Current deferred tax asset | 9,692 | 9,682 | ||||||
| Other current assets | 550 | 2,075 | ||||||
| Assets held for sale | 1,589 | — | ||||||
| Total current assets | 299,790 | 264,713 | ||||||
Property and Equipment: | ||||||||
| Land | 2,478 | 3,247 | ||||||
| Buildings and improvements | 46,601 | 47,031 | ||||||
| Machinery and equipment | 87,095 | 84,834 | ||||||
| Accumulated depreciation | (82,582 | ) | (78,908 | ) | ||||
| Total property and equipment, net | 53,592 | 56,204 | ||||||
Goodwill | 4,425 | 4,383 | ||||||
| Other assets | 2,295 | 2,562 | ||||||
| Non-current deferred tax asset | 2,529 | 2,516 | ||||||
| Total Assets | $ | 362,631 | $ | 330,378 | ||||
LIABILITIES AND SHAREHOLDERS’ INVESTMENT | ||||||||
Current Liabilities: | ||||||||
| Notes payable | $ | 4,770 | $ | 383 | ||||
| Current maturities of long-term debt | 6,848 | 6,839 | ||||||
| Accounts payable | 14,852 | 10,483 | ||||||
| Accrued payroll-related costs | 20,656 | 24,742 | ||||||
| Advance payments from customers | 48,485 | 40,456 | ||||||
| Accrued warranty costs | 5,271 | 4,862 | ||||||
| Accrued income taxes | 7,666 | 5,571 | ||||||
| Other accrued liabilities | 15,580 | 15,838 | ||||||
| Total current liabilities | 124,128 | 109,174 | ||||||
Deferred income taxes | 6,502 | 6,265 | ||||||
| Long-term debt, less current maturities | 29,238 | 30,487 | ||||||
| Other long-term liabilities | 9,133 | 8,346 | ||||||
| Total Liabilities | 169,001 | 154,272 | ||||||
Shareholders’ Investment: | ||||||||
| Common stock, $.25 par; 64,000 shares authorized: | ||||||||
| 21,124 and 20,720 shares issued and outstanding | 5,281 | 5,180 | ||||||
| Additional paid-in capital | 4,259 | 1,534 | ||||||
| Retained earnings | 173,682 | 162,076 | ||||||
| Accumulated other comprehensive income | 10,408 | 7,316 | ||||||
| Total shareholders’ investment | 193,630 | 176,106 | ||||||
| Total Liabilities and Shareholders’ Investment | $ | 362,631 | $ | 330,378 | ||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
2
MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited — in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 27, 2004 | March 29, 2003 | March 27, 2004 | March 29, 2003 | |||||||||||
| Revenue | $ | 88,239 | $ | 93,236 | $ | 172,870 | $ | 177,675 | ||||||
| Cost of sales | 54,037 | 59,916 | 103,979 | 113,049 | ||||||||||
| Gross profit | 34,202 | 33,320 | 68,891 | 64,626 | ||||||||||
Operating expenses: | ||||||||||||||
| Selling | 14,888 | 13,490 | 28,438 | 26,352 | ||||||||||
| General and administrative | 6,658 | 7,618 | 13,032 | 13,441 | ||||||||||
| Research and development | 3,458 | 4,043 | 7,060 | 7,623 | ||||||||||
| Total operating expenses | 25,004 | 25,151 | 48,530 | 47,416 | ||||||||||
| Income from operations | 9,198 | 8,169 | 20,361 | 17,210 | ||||||||||
| Interest expense | (679 | ) | (949 | ) | (1,382 | ) | (1,993 | ) | ||||||
| Interest income | 447 | 617 | 865 | 1,104 | ||||||||||
| Other income, net | 668 | 1,729 | 1,322 | 1,712 | ||||||||||
| Income before income taxes and discontinued operations | 9,634 | 9,566 | 21,166 | 18,033 | ||||||||||
| Provision for income taxes | 3,093 | 3,184 | 7,048 | 5,951 | ||||||||||
| Income before discontinued operations | 6,541 | 6,382 | 14,118 | 12,082 | ||||||||||
Discontinued operations: | ||||||||||||||
| Loss from discontinued operations, net of tax | — | (17 | ) | — | (220 | ) | ||||||||
| Loss on sale of discontinued businesses, net of tax | — | (2,402 | ) | — | (2,402 | ) | ||||||||
| Loss from discontinued operations, net of tax | — | (2,419 | ) | — | (2,622 | ) | ||||||||
| Net income | $ | 6,541 | $ | 3,963 | $ | 14,118 | $ | 9,460 | ||||||
Earnings per share: | ||||||||||||||
| Basic– | ||||||||||||||
| Income before discontinued operations | $ | 0.31 | $ | 0.30 | $ | 0.67 | $ | 0.57 | ||||||
| Discontinued operations: | ||||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | (0.01 | ) | |||||||||
| Loss on sale of discontinued businesses, net of tax | — | (0.11 | ) | — | (0.11 | ) | ||||||||
| Loss from discontinued operations, net of tax | — | (0.11 | ) | — | (0.12 | ) | ||||||||
| Earnings per share | $ | 0.31 | $ | 0.19 | $ | 0.67 | $ | 0.45 | ||||||
| Weighted average number of common shares outstanding – basic | 21,113 | 21,112 | 20,936 | 21,122 | ||||||||||
Diluted– | ||||||||||||||
| Income before discontinued operations | $ | 0.30 | $ | 0.30 | $ | 0.65 | $ | 0.56 | ||||||
| Discontinued operations: | ||||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | (0.01 | ) | |||||||||
| Loss on sale of discontinued businesses, net of tax | — | (0.11 | ) | — | (0.11 | ) | ||||||||
| Loss from discontinued operations, net of tax | — | (0.11 | ) | — | (0.12 | ) | ||||||||
| Earnings per share | $ | 0.30 | $ | 0.19 | $ | 0.65 | $ | 0.44 | ||||||
| Weighted average number of common shares outstanding – diluted | 22,021 | 21,404 | 21,752 | 21,379 | ||||||||||
The accompanying notes to consolidated financial statements are an integral part of these statements.
3
MTS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
(unaudited — in thousands)
| Six Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| March 27, 2004 | March 29, 2003 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 14,118 | $ | 9,460 | ||||
| Adjustments to reconcile net income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Loss from discontinued operations | — | 220 | ||||||
| Loss on sale of discontinued businesses | — | 2,402 | ||||||
| Depreciation and amortization | 4,586 | 4,736 | ||||||
| Deferred income taxes | (95 | ) | 70 | |||||
| Bad debt provision | 90 | 151 | ||||||
Changes in operating assets and liabilities, | ||||||||
| net of effects of businesses divested: | ||||||||
| Accounts, unbilled contracts and retainage receivables | (3,416 | ) | 8,758 | |||||
| Inventories | 1,553 | 6,755 | ||||||
| Prepaid expenses | (861 | ) | (203 | ) | ||||
| Other assets | 1,388 | (1,222 | ) | |||||
| Accounts payable | 4,184 | (825 | ) | |||||
| Accrued payroll-related costs | (2,676 | ) | 2,611 | |||||
| Advance payments from customers | 6,746 | 4,555 | ||||||
| Accrued warranty costs | 336 | 448 | ||||||
| Other current liabilities | 2,083 | (8,375 | ) | |||||
| Net cash provided by operating activities | 28,036 | 29,541 | ||||||
Cash flows from investing activities: | ||||||||
| Additions to property and equipment | (2,698 | ) | (3,425 | |||||