MTS Reports Financial Results For Fiscal Year 2016 Full Year And Fiscal Year 2017 First Quarter
Fiscal Year 2016
- Revenue of
$650 million increased 15% compared to the prior year with organic revenue growth of 7% from continued improvement in Test backlog conversion efficiencies - GAAP EPS was
$1.70 , including a$1.02 negative impact from acquisition-related, acquisition integration, acquisition inventory fair value adjustment and restructuring expenses, consistent with previously issued preliminary earnings - Test Services achieved record full year revenue of
$86 million , an increase of 9%
Fiscal 2017 First Quarter
- Revenue of
$199 million , an increase of 42% from prior year due to organic revenue growth of 10%, and 32% growth as a result of the PCB acquisition - GAAP EPS of
$0.09 , including a$0.46 negative impact from acquisition integration, acquisition inventory fair value adjustment and restructuring expenses and costs associated with the China investigation - Strong operating cash flow of
$29 million , primarily due to continued focus on working capital improvements
"Before we discuss our financial results and outlook for fiscal year 2017, we will address the investigation undertaken to examine possible violations of the Company's Code of Conduct. The investigation, overseen by the Audit Committee of our Board of Directors, and conducted using external legal counsel and forensic experts, confirmed that certain employees involved with our
Dr. Graves continued, "With regard to the business performance and the PCB acquisition that closed in
Full Year Results
Revenue was
Earnings before taxes were
Diluted earnings per share (EPS) on a GAAP basis were
Fiscal 2017 First Quarter Results
Compared to the same quarter in the prior year, reported revenue was
Diluted earnings per share (EPS) on a GAAP basis were
Outlook
For fiscal year 2017, with the higher backlog conversion rates in Test and more modest order levels in the first quarter, we will likely experience relatively flat to slightly lower revenue and earnings from the Test business this year. In addition to the added PCB business, we expect to see solid demand in our Sensors business, driven by market fundamentals and the resurgence of investment in the basic materials industries around the world.
Based on these factors, the company is forecasting revenues in the range of $760 million to $790 million and GAAP earnings per share of
Longer term, the PCB acquisition supports the strategic priorities of investing in markets with the opportunity to achieve sustainable double-digit top and bottom line growth, strengthening the MTS global footprint and focusing on areas that generate strong free cash flow. MTS has experienced the combined Sensors business for two full quarters and has a greatly expanded product portfolio delivered with outstanding customer service which will enhance the value of MTS to both customers and shareholders for years to come.
Dr. Graves concluded, "Although overall orders were down slightly in fiscal year 2016, there were many positives coming into fiscal year 2017. We are encouraged by the strong first quarter results of both the Test and Sensors businesses, and believe that our improved project execution and backlog conversion capability in Test, as well as our growing Test Service business, will position us well for the remainder of the year. Our Sensors business exposure to excellent fundamental market drivers such as industrial automation, testing of new products and energy generation, combined with an outstanding global customer base and delivery model, make us optimistic about the sustained growth prospects for our Sensors business this year and well into the future."
Non-GAAP Financial Measures
We believe that disclosing diluted earnings per share excluding the impact from acquisition-related expenses, acquisition integration expenses, acquisition inventory fair value adjustment, China investigation expenses and restructuring expenses is useful to investors as a measure of operating performance. We use this as one measure to monitor and evaluate operating performance. Diluted earnings per share excluding these items, is a financial measure that does not reflect United States Generally Accepted Accounting Principles (GAAP). We calculate this measure by adding back the after-tax effect of the acquisition-related expenses, acquisition integration expenses, acquisition inventory fair value adjustment, China investigation expenses and restructuring expenses to net income and dividing the result by the diluted weighted average shares outstanding.
We believe that disclosing earnings before interest, taxes, depreciation and amortization (EBITDA) and EBITDA excluding the impact from stock-based compensation, acquisition-related expenses, acquisition integration expenses, acquisition inventory fair value adjustment, China investigation expenses and restructuring expenses (Adjusted EBITDA) is useful to investors as a measure of leverage and operating performance. We use these measures to monitor and evaluate leverage and operating performance. EBITDA and Adjusted EBITDA are financial measures that do not reflect GAAP. We calculate EBITDA by adding back interest, taxes, depreciation and amortization expense to net income. Adjusted EBITDA is calculated by adding back stock-based compensation, acquisition-related expenses, acquisition integration expenses, acquisition inventory fair value adjustment, China investigation expenses and restructuring expenses to EBITDA.
Investors should consider these non-GAAP financial measures in addition to, not as a substitute for or better than, financial measures prepared in accordance with GAAP. Reconciliations of the components of these measures to the most directly comparable GAAP financial measures are included in Exhibits B, C, D and E to this release.
FY2016 Full Year and FY17 First Quarter Conference Call
A conference call will be held on
A transcript of the call can also be accessed from the MTS website at http://investor.mts.com. It will be available on
About
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. Statements made under the heading "Outlook" are forward-looking statements, and words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions identify forward-looking statements in other parts of the release. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, statements about the expected benefits of the PCB acquisition and other statements that are not historical facts. These statements are based on MTS's current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Risks, uncertainties and assumptions that could cause MTS's actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those described in the "Risk Factors" section of MTS's most recent Form 10-K filed with the
MTS SYSTEMS CORPORATION |
|||||||
Condensed Consolidated Statements of Income |
|||||||
(unaudited - in thousands, except per share data) |
|||||||
Three Months Ended |
|||||||
December 31, |
January 2, |
||||||
Revenue |
$ |
199,279 |
$ |
140,501 |
|||
Cost of sales |
125,815 |
87,990 |
|||||
Gross profit |
73,464 |
52,511 |
|||||
Gross margin |
36.9 |
% |
37.4 |
% |
|||
Operating expenses |
|||||||
Selling, general and administrative |
54,493 |
33,616 |
|||||
Research and development |
8,681 |
5,294 |
|||||
Total operating expenses |
63,174 |
38,910 |
|||||
Income from operations |
10,290 |
13,601 |
|||||
Operating margin |
5.2 |
% |
9.7 |
% |
|||
Interest income (expense), net |
(7,280) |
(201) |
|||||
Other income (expense), net |
(829) |
(310) |
|||||
Income before income taxes |
2,181 |
13,090 |
|||||
Provision for income taxes |
476 |
1,316 |
|||||
Net income |
$ |
1,705 |
$ |
11,774 |
|||
Earnings per share |
|||||||
Basic |
|||||||
Earnings per share |
$ |
0.09 |
$ |
0.79 |
|||
Weighted average common shares outstanding |
18,969 |
14,861 |
|||||
Diluted |
|||||||
Earnings per share |
$ |
0.09 |
$ |
0.78 |
|||
Weighted average common shares outstanding |
19,074 |
14,999 |
MTS SYSTEMS CORPORATION |
|||||||
Condensed Consolidated Statements of Income |
|||||||
(unaudited - in thousands, except per share data) |
|||||||
Twelve Months Ended |
|||||||
October 1, |
October 3, |
||||||
Revenue |
$ |
650,147 |
$ |
563,934 |
|||
Cost of sales |
418,743 |
344,321 |
|||||
Gross profit |
231,404 |
219,613 |
|||||
Gross margin |
35.6 |
% |
38.9 |
% |
|||
Operating expenses |
|||||||
Selling, general and administrative |
164,305 |
134,412 |
|||||
Research and development |
25,336 |
23,705 |
|||||
Total operating expenses |
189,641 |
158,117 |
|||||
Income from operations |
41,763 |
61,496 |
|||||
Operating margin |
6.4 |
% |
10.9 |
% |
|||
Interest income (expense), net |
(8,489) |
(795) |
|||||
Other income (expense), net |
238 |
(1,529) |
|||||
Income before income taxes |
33,512 |
59,172 |
|||||
Provision for income taxes |
6,018 |
13,710 |
|||||
Net income |
$ |
27,494 |
$ |
45,462 |
|||
Earnings per share |
|||||||
Basic |
|||||||
Earnings per share |
$ |
1.72 |
$ |
3.03 |
|||
Weighted average common shares outstanding |
16,027 |
14,984 |
|||||
Diluted |
|||||||
Earnings per share |
$ |
1.70 |
$ |
3.00 |
|||
Weighted average common shares outstanding |
16,179 |
15,142 |
MTS SYSTEMS CORPORATION |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(unaudited - in thousands, except per share data) |
|||||||
December 31, |
October 1, |
||||||
ASSETS |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
95,949 |
$ |
84,780 |
|||
Accounts receivable, net |
114,804 |
133,500 |
|||||
Unbilled accounts receivable |
74,900 |
76,626 |
|||||
Inventories, net |
122,670 |
132,566 |
|||||
Other current assets |
21,711 |
12,793 |
|||||
Total current assets |
430,034 |
440,265 |
|||||
Property and equipment, net |
98,665 |
100,789 |
|||||
Goodwill |
369,093 |
369,700 |
|||||
Intangible assets, net |
263,469 |
266,789 |
|||||
Other long-term assets |
9,527 |
10,477 |
|||||
Total assets |
$ |
1,170,788 |
$ |
1,188,020 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Current liabilities |
|||||||
Current maturities of long-term debt, net |
$ |
10,032 |
$ |
9,850 |
|||
Accounts payable |
44,902 |
46,383 |
|||||
Advance payments from customers |
87,233 |
72,728 |
|||||
Other accrued liabilities |
69,575 |
87,160 |
|||||
Total current liabilities |
211,742 |
216,121 |
|||||
Long-term debt, less current maturities |
452,424 |
455,001 |
|||||
Other long-term liabilities |
108,401 |
111,638 |
|||||
Total liabilities |
772,567 |
782,760 |
|||||
Shareholders' equity |
|||||||
Common stock, $0.25 par; 64,000 shares authorized: |
|||||||
16,712 and 16,660 shares issued and outstanding as |
|||||||
of December 31, 2016 and October 1, 2016, respectively |
4,178 |
4,165 |
|||||
Additional paid-in capital |
156,053 |
154,879 |
|||||
Retained earnings |
253,280 |
256,589 |
|||||
Accumulated other comprehensive income (loss) |
(15,290) |
(10,373) |
|||||
Total shareholders' equity |
398,221 |
405,260 |
|||||
Total liabilities and shareholders' equity |
$ |
1,170,788 |
$ |
1,188,020 |
Exhibit A |
||||||||||
MTS SYSTEMS CORPORATION |
||||||||||
Segment Financial Information |
||||||||||
(unaudited - in thousands) |
||||||||||
Three Months Ended |
||||||||||
Test Segment |
December 31, |
January 2, |
% Variance |
|||||||
Revenue |
$ |
131,126 |
$ |
118,810 |
10 |
% |
||||
Cost of sales |
84,292 |
77,791 |
8 |
% |
||||||
Gross profit |
46,834 |
41,019 |
14 |
% |
||||||
Gross margin |
35.7 |
% |
34.5 |
% |
||||||
Operating expenses |
35,118 |
30,632 |
15 |
% |
||||||
Income (loss) from operations |
$ |
11,716 |
$ |
10,387 |
13 |
% |
||||
Sensors Segment |
||||||||||
Revenue |
$ |
68,153 |
$ |
21,691 |
214 |
% |
||||
Cost of sales |
41,523 |
10,199 |
307 |
% |
||||||
Gross profit |
26,630 |
11,492 |
132 |
% |
||||||
Gross margin |
39.1 |
% |
53.0 |
% |
||||||
Operating expenses |
28,056 |
8,278 |
239 |
% |
||||||
Income (loss) from operations |
$ |
(1,426) |
$ |
3,214 |
(144) |
% |
||||
Total Company |
||||||||||
Revenue |
$ |
199,279 |
$ |
140,501 |
42 |
% |
||||
Cost of sales |
125,815 |
87,990 |
43 |
% |
||||||
Gross profit |
73,464 |
52,511 |
40 |
% |
||||||
Gross margin |
36.9 |
% |
37.4 |
% |
||||||
Operating expenses |
63,174 |
38,910 |
62 |
% |
||||||
Income (loss) from operations |
$ |
10,290 |
$ |
13,601 |
(24) |
% |
Exhibit B |
|||||||||
MTS SYSTEMS CORPORATION |
|||||||||
Reconciliation of Earnings Per Share Excluding Acquisition Integration, |
|||||||||
Acquisition Inventory Step-up, China Investigation and Restructuring Expenses |
|||||||||
(unaudited - in thousands, except per share data) |
|||||||||
Three Months Ended |
|||||||||
December 31, 2016 |
|||||||||
Pre-Tax |
Tax |
Net |
|||||||
Net income |
$ |
2,181 |
$ |
476 |
$ |
1,705 |
|||
Acquisition integration expenses1 |
1,688 |
436 |
1,252 |
||||||
Acquisition inventory step-up1 |
7,724 |
1,993 |
5,731 |
||||||
China investigation expenses1 |
1,976 |
510 |
1,466 |
||||||
Restructuring expenses2 |
563 |
196 |
367 |
||||||
Adjusted net income3 |
$ |
14,132 |
$ |
3,611 |
$ |
10,521 |
|||
Weighted average diluted common shares outstanding |
19,074 |
||||||||
Diluted earnings per share |
$ |
0.11 |
$ |
0.02 |
$ |
0.09 |
|||
Diluted earnings per share - Impact of acquisition integration expenses |
0.10 |
0.03 |
0.07 |
||||||
Diluted earnings per share - Impact of acquisition inventory step-up |
0.40 |
0.10 |
0.30 |
||||||
Diluted earnings per share - Impact of China investigation expenses |
0.10 |
0.03 |
0.07 |
||||||
Diluted earnings per share - Impact of restructuring expenses |
0.03 |
0.01 |
0.02 |
||||||
Adjusted diluted earnings per share3 |
$ |
0.74 |
$ |
0.19 |
$ |
0.55 |
|||
1 |
In determining the tax impact of acquisition integration, acquisition inventory step-up and China investigation expenses, we applied a U.S. effective income tax rate before discrete items to these expenses. |
|||||||||
2 |
In determining the tax impact of restructuring expenses, we applied the statutory rate in effect for each jurisdiction where restructuring expenses were incurred. |
|||||||||
3 |
Denotes non-GAAP financial measure. |
Exhibit C |
|||||||||
MTS SYSTEMS CORPORATION |
|||||||||
Reconciliation of Earnings Per Share Excluding Acquisition-Related, |
|||||||||
Acquisition Integration, Acquisition Inventory Step-up and Restructuring Expenses |
|||||||||
(unaudited - in thousands, except per share data) |
|||||||||
Twelve Months Ended |
|||||||||
October 1, 2016 |
|||||||||
Pre-Tax |
Tax |
Net |
|||||||
Net income |
$ |
33,512 |
$ |
6,018 |
$ |
27,494 |
|||
Acquisition-related expenses1 |
10,170 |
2,848 |
7,322 |
||||||
Acquisition integration expenses1 |
2,846 |
797 |
2,049 |
||||||
Acquisition inventory step-up1 |
7,916 |
2,224 |
5,692 |
||||||
Restructuring expenses2 |
2,165 |
700 |
1,465 |
||||||
Adjusted net income3 |
$ |
56,609 |
$ |
12,587 |
$ |
44,022 |
|||
Weighted average diluted common shares outstanding |
16,179 |
||||||||
Diluted earnings per share |
$ |
2.07 |
$ |
0.37 |
$ |
1.70 |
|||
Diluted earnings per share - Impact of acquisition-related expenses |
0.63 |
0.18 |
0.45 |
||||||
Diluted earnings per share - Impact of acquisition integration expenses |
0.18 |
0.05 |
0.13 |
||||||
Diluted earnings per share - Impact of acquisition inventory step-up |
0.49 |
0.14 |
0.35 |
||||||
Diluted earnings per share - Impact of restructuring expenses |
0.13 |
0.04 |
0.09 |
||||||
Adjusted diluted earnings per share3 |
$ |
3.50 |
$ |
0.78 |
$ |
2.72 |
|||
1 |
In determining the tax impact of acquisition-related, acquisition integration and acquisition inventory step-up expenses, we applied a U.S. effective income tax rate before discrete tax items to these expenses. |
|||||||||
2 |
In determining the tax impact of restructuring expenses, we applied the statutory rate in effect for each jurisdiction where restructuring expenses were incurred. |
|||||||||
3 |
Denotes non-GAAP financial measure. |
Exhibit D |
||||||
MTS SYSTEMS CORPORATION |
||||||
Reconciliation of EBITDA and Adjusted EBITDA to Net Income |
||||||
(unaudited - in thousands) |
||||||
Three Months Ended |
Twelve Months Ended |
|||||
December 31, 2016 |
October 1, 2016 |
|||||
Net income |
$ |
1,705 |
$ |
27,494 |
||
Provision for income taxes |
476 |
6,018 |
||||
Interest (income) expense, net |
7,280 |
8,489 |
||||
Depreciation and amortization |
8,392 |
24,077 |
||||
EBITDA1 |
$ |
17,853 |
$ |
66,078 |
||
Stock-based compensation |
1,721 |
7,224 |
||||
Acquisition-related expenses2 |
— |
10,281 |
||||
Acquisition integration expenses3 |
1,688 |
2,344 |
||||
Acquisition inventory step-up |
7,724 |
7,916 |
||||
China investigation expenses |
1,976 |
— |
||||
Restructuring expenses4 |
563 |
2,533 |
||||
Adjusted EBITDA1 |
$ |
31,525 |
$ |
96,376 |
||
1 |
Denotes non-GAAP financial measure. |
||||||
2 |
Acquisition-related expenses were adjusted to exclude stock-based compensation forfeitures that were included in the stock-based compensation line. |
||||||
3 |
Acquisition integration expenses were adjusted to exclude interest expense that is included in the interest (income) expense, net line. |
||||||
4 |
Restructuring expenses were adjusted to exclude stock-based compensation forfeitures that were included in the stock-based compensation line. |
Exhibit E |
||||||
MTS SYSTEMS CORPORATION |
||||||
Reconciliation of EBITDA and Adjusted EBITDA to Net Income - Outlook |
||||||
(unaudited - in thousands) |
||||||
Twelve Months Ended |
||||||
September 30, 2017 |
||||||
Low |
High |
|||||
Net income |
$ |
15,400 |
$ |
23,000 |
||
Provision for income taxes |
3,900 |
6,500 |
||||
Interest (income) expense, net |
30,000 |
31,000 |
||||
Depreciation and amortization |
34,000 |
35,000 |
||||
EBITDA1 |
$ |
83,300 |
$ |
95,500 |
||
Stock-based compensation and non-recurring expenses2 |
31,700 |
34,500 |
||||
Adjusted EBITDA1 |
$ |
115,000 |
$ |
130,000 |
||
1 |
Denotes non-GAAP financial measure. |
||||||
2 |
Includes pre-tax forecast expenses for stock-based compensation, acquisition integration, acquisition inventory step-up, China investigation and restructuring. |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mts-reports-financial-results-for-fiscal-year-2016-full-year-and-fiscal-year-2017-first-quarter-300437499.html
SOURCE
Andy Cebulla, Director of Investor Relations and Treasurer, (952) 937-4000