MTS Reports Fiscal 2017 Second Quarter Financial Results
- Revenues of
$193 million , an increase of 41 percent from the prior year period, with continued double digit organic growth of 10 percent and 31 percent growth from the PCB acquisition - Gross margin of 41 percent increased 790 basis points from the prior year period driven by continued focus on project execution in Test and Sensors being a larger part of MTS results
- GAAP EPS increased 90% from the prior year period to
$0.38 , including a$0.29 negative impact from costs associated with theChina investigation and acquisition integration and restructuring expenses - Strong year-to-date operating cash flow of
$41 million primarily due to continued focus on working capital improvements
"The second quarter of fiscal year 2017 was the third quarter in a row where we saw double-digit organic revenue growth and very strong overall growth with the additional revenue from the PCB acquisition. We continue to improve our Test backlog conversion rates, increase Test gross margin rates and drive solid top and bottom line growth throughout the business. The integration of PCB continues to progress as anticipated, which is translating into additional revenue and earnings in our Sensors segment. Test orders remained a challenge in the second quarter, however we believe the low point is now behind us and anticipate consistent and meaningful improvements in Test order rates throughout the second half of the year and into fiscal year 2018," said Dr.
Fiscal 2017 Second Quarter Results
Revenue was
Overall, Test orders were down 11.3 percent to
Earnings before taxes was
Diluted earnings per share (EPS) on a GAAP basis was
A non-GAAP financial metric that we are tracking this year is our Adjusted EBITDA, as described in the "Non-GAAP Financial Measures" section, which reached
Outlook
The company reaffirms its expected fiscal year 2017 revenues of $760 million to $790 million and GAAP earnings per share of
Non-GAAP Financial Measures
We believe that disclosing diluted earnings per share excluding the impact from acquisition integration expenses, acquisition inventory fair value adjustment,
We believe that disclosing earnings before interest, taxes, depreciation and amortization (EBITDA) and EBITDA excluding the impact from stock-based compensation, acquisition integration expenses, acquisition inventory fair value adjustment,
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 earnings release.
Second 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 |
Six Months Ended |
||||||||||||||
April 1, |
April 2, |
April 1, |
April 2, |
||||||||||||
Revenue |
$ |
193,424 |
$ |
137,098 |
$ |
392,703 |
$ |
277,599 |
|||||||
Cost of sales |
114,568 |
91,954 |
240,383 |
179,944 |
|||||||||||
Gross profit |
78,856 |
45,144 |
152,320 |
97,655 |
|||||||||||
Gross margin |
40.8 |
% |
32.9 |
% |
38.8 |
% |
35.2 |
% |
|||||||
Operating expenses |
|||||||||||||||
Selling, general and administrative |
54,183 |
35,021 |
108,676 |
68,637 |
|||||||||||
Research and development |
9,261 |
5,752 |
17,942 |
11,046 |
|||||||||||
Total operating expenses |
63,444 |
40,773 |
126,618 |
79,683 |
|||||||||||
Income from operations |
15,412 |
4,371 |
25,702 |
17,972 |
|||||||||||
Operating margin |
8.0 |
% |
3.2 |
% |
6.5 |
% |
6.5 |
% |
|||||||
Interest income (expense), net |
(7,418) |
(257) |
(14,698) |
(458) |
|||||||||||
Other income (expense), net |
666 |
107 |
(163) |
(203) |
|||||||||||
Income before income taxes |
8,660 |
4,221 |
10,841 |
17,311 |
|||||||||||
Provision for income taxes |
1,461 |
1,223 |
1,937 |
2,539 |
|||||||||||
Net income |
$ |
7,199 |
$ |
2,998 |
$ |
8,904 |
$ |
14,772 |
|||||||
Earnings per share |
|||||||||||||||
Basic |
|||||||||||||||
Earnings per share |
$ |
0.38 |
$ |
0.20 |
$ |
0.47 |
$ |
1.00 |
|||||||
Weighted average common shares outstanding |
19,016 |
14,756 |
18,992 |
14,808 |
|||||||||||
Diluted |
|||||||||||||||
Earnings per share |
$ |
0.38 |
$ |
0.20 |
$ |
0.47 |
$ |
0.99 |
|||||||
Weighted average common shares outstanding |
19,109 |
14,851 |
19,095 |
14,925 |
MTS SYSTEMS CORPORATION |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(unaudited - in thousands, except per share data) |
|||||||
April 1, |
October 1, |
||||||
ASSETS |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
97,433 |
$ |
84,780 |
|||
Accounts receivable, net |
115,830 |
133,500 |
|||||
Unbilled accounts receivable |
73,951 |
76,626 |
|||||
Inventories, net |
125,146 |
132,566 |
|||||
Other current assets |
21,378 |
12,793 |
|||||
Total current assets |
433,738 |
440,265 |
|||||
Property and equipment, net |
99,131 |
100,789 |
|||||
Goodwill |
369,224 |
369,700 |
|||||
Intangible assets, net |
260,513 |
266,789 |
|||||
Other long-term assets |
9,291 |
10,477 |
|||||
Total assets |
$ |
1,171,897 |
$ |
1,188,020 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Current liabilities |
|||||||
Current maturities of long-term debt, net |
$ |
10,218 |
$ |
9,850 |
|||
Accounts payable |
41,480 |
46,383 |
|||||
Advance payments from customers |
86,766 |
72,728 |
|||||
Other accrued liabilities |
73,019 |
87,160 |
|||||
Total current liabilities |
211,483 |
216,121 |
|||||
Long-term debt, less current maturities |
449,798 |
455,001 |
|||||
Other long-term liabilities |
106,572 |
111,638 |
|||||
Total liabilities |
767,853 |
782,760 |
|||||
Shareholders' equity |
|||||||
Common stock, $0.25 par; 64,000 shares authorized: |
|||||||
16,724 and 16,660 shares issued and outstanding as |
|||||||
of April 1, 2017 and October 1, 2016, respectively |
4,181 |
4,165 |
|||||
Additional paid-in capital |
157,277 |
154,879 |
|||||
Retained earnings |
255,459 |
256,589 |
|||||
Accumulated other comprehensive income (loss) |
(12,873) |
(10,373) |
|||||
Total shareholders' equity |
404,044 |
405,260 |
|||||
Total liabilities and shareholders' equity |
$ |
1,171,897 |
$ |
1,188,020 |
Exhibit A |
||||||||||
MTS SYSTEMS CORPORATION |
||||||||||
Segment Financial Information |
||||||||||
(unaudited - in thousands) |
||||||||||
Three Months Ended |
||||||||||
Test Segment |
April 1, |
April 2, |
% Variance |
|||||||
Revenue |
$ |
123,840 |
$ |
113,797 |
9 |
% |
||||
Cost of sales |
79,106 |
80,628 |
(2) |
% |
||||||
Gross profit |
44,734 |
33,169 |
35 |
% |
||||||
Gross margin |
36.1 |
% |
29.1 |
% |
||||||
Operating expenses |
38,367 |
31,454 |
22 |
% |
||||||
Income from operations |
$ |
6,367 |
$ |
1,715 |
271 |
% |
||||
Sensors Segment |
||||||||||
Revenue |
$ |
69,584 |
$ |
23,301 |
199 |
% |
||||
Cost of sales |
35,462 |
11,326 |
213 |
% |
||||||
Gross profit |
34,122 |
11,975 |
185 |
% |
||||||
Gross margin |
49.0 |
% |
51.4 |
% |
||||||
Operating expenses |
25,077 |
9,319 |
169 |
% |
||||||
Income from operations |
$ |
9,045 |
$ |
2,656 |
241 |
% |
||||
Total Company |
||||||||||
Revenue |
$ |
193,424 |
$ |
137,098 |
41 |
% |
||||
Cost of sales |
114,568 |
91,954 |
25 |
% |
||||||
Gross profit |
78,856 |
45,144 |
75 |
% |
||||||
Gross margin |
40.8 |
% |
32.9 |
% |
||||||
Operating expenses |
63,444 |
40,773 |
56 |
% |
||||||
Income from operations |
$ |
15,412 |
$ |
4,371 |
253 |
% |
Exhibit B |
|||||||||
MTS SYSTEMS CORPORATION |
|||||||||
Reconciliation of Earnings Per Share Excluding Acquisition Integration, |
|||||||||
China Investigation and Restructuring Expenses |
|||||||||
(unaudited - in thousands, except per share data) |
|||||||||
Three Months Ended |
|||||||||
April 1, 2017 |
|||||||||
Pre-Tax |
Tax |
Net |
|||||||
Net income |
$ |
8,660 |
$ |
1,461 |
$ |
7,199 |
|||
Acquisition integration expenses1 |
690 |
188 |
502 |
||||||
China investigation expenses1 |
6,759 |
1,827 |
4,932 |
||||||
Restructuring expenses2 |
381 |
134 |
247 |
||||||
Adjusted net income3 |
$ |
16,490 |
$ |
3,610 |
$ |
12,880 |
|||
Weighted average diluted common shares outstanding |
19,109 |
||||||||
Diluted earnings per share |
$ |
0.45 |
$ |
0.07 |
$ |
0.38 |
|||
Diluted earnings per share - Impact of acquisition integration expenses |
0.04 |
0.01 |
0.03 |
||||||
Diluted earnings per share - Impact of China investigation expenses |
0.35 |
0.10 |
0.25 |
||||||
Diluted earnings per share - Impact of restructuring expenses |
0.02 |
0.01 |
0.01 |
||||||
Adjusted diluted earnings per share3 |
$ |
0.86 |
$ |
0.19 |
$ |
0.67 |
|||
1 |
In determining the tax impact of acquisition integration 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 Integration |
|||||||||
Acquisition Inventory Fair Value Adjustment, China Investigation and Restructuring Expenses |
|||||||||
(unaudited - in thousands, except per share data) |
|||||||||
Six Months Ended |
|||||||||
April 1, 2017 |
|||||||||
Pre-Tax |
Tax |
Net |
|||||||
Net income |
$ |
10,841 |
$ |
1,937 |
$ |
8,904 |
|||
Acquisition integration expenses1 |
2,378 |
624 |
1,754 |
||||||
Acquisition inventory fair value adjustment1 |
7,724 |
1,993 |
5,731 |
||||||
China investigation expenses1 |
8,735 |
2,337 |
6,398 |
||||||
Restructuring expenses2 |
944 |
330 |
614 |
||||||
Adjusted net income3 |
$ |
30,622 |
$ |
7,221 |
$ |
23,401 |
|||
Weighted average diluted common shares outstanding |
19,095 |
||||||||
Diluted earnings per share |
$ |
0.57 |
$ |
0.10 |
$ |
0.47 |
|||
Diluted earnings per share - Impact of acquisition integration expenses |
0.12 |
0.03 |
0.09 |
||||||
Diluted earnings per share - Impact of acquisition inventory fair value adjustment |
0.40 |
0.10 |
0.30 |
||||||
Diluted earnings per share - Impact of China investigation expenses |
0.46 |
0.12 |
0.34 |
||||||
Diluted earnings per share - Impact of restructuring expenses |
0.05 |
0.02 |
0.03 |
||||||
Adjusted diluted earnings per share3 |
$ |
1.60 |
$ |
0.37 |
$ |
1.23 |
|||
1 |
In determining the tax impact of acquisition integration, acquisition inventory fair value adjustment 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 D |
||||||
MTS SYSTEMS CORPORATION |
||||||
Reconciliation of EBITDA and Adjusted EBITDA to Net Income |
||||||
(unaudited - in thousands) |
||||||
Three Months Ended |
Six Months Ended |
|||||
April 1, 2017 |
April 1, 2017 |
|||||
Net income |
$ |
7,199 |
$ |
8,904 |
||
Provision for income taxes |
1,461 |
1,937 |
||||
Interest (income) expense, net |
7,418 |
14,698 |
||||
Depreciation and amortization |
8,440 |
16,832 |
||||
EBITDA1 |
$ |
24,518 |
$ |
42,371 |
||
Stock-based compensation |
916 |
2,637 |
||||
Acquisition integration expenses |
690 |
2,378 |
||||
Acquisition inventory fair value adjustment |
— |
7,724 |
||||
China investigation expenses |
6,759 |
8,735 |
||||
Restructuring expenses |
381 |
944 |
||||
Adjusted EBITDA1 |
$ |
33,264 |
$ |
64,789 |
||
1 |
Denotes non-GAAP financial measure. |
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 fair value adjustment, restructuring and China investigation. |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mts-reports-fiscal-2017-second-quarter-financial-results-300453447.html
SOURCE
Investor Relations Contact: Brian Ross, Corporate Controller, (952) 937-4000