MTS Reports Fiscal Year 2019 Fourth Quarter And Full Year Financial Results
FULL YEAR FINANCIAL AND OPERATING HIGHLIGHTS
- Record revenue of
$892.5 million , an increase of 14.7% - GAAP diluted earnings per share of
$2.21 , a decrease of$0.97 or 30.5% - Adjusted diluted earnings per share of
$2.44 , a decrease of$0.84 or 25.6% - GAAP net income of
$43.1 million , or 4.8%, a decrease of 29.8% - Record Adjusted EBITDA of
$132.6 million , an increase of 15.4% - Declared 151st consecutive quarterly dividend
FINANCIAL TABLE
Three Months Ended |
Twelve Months Ended |
||||||||||||||
(in thousands, except per share data - unaudited) |
September 28, 2019 |
September 29, 2018 |
September 28, 2019 |
September 29, 2018 |
|||||||||||
Revenue |
$ |
224,082 |
$ |
197,879 |
$ |
892,518 |
$ |
778,032 |
|||||||
Revenue % increase (decrease)1 |
13.2 |
% |
(1.8) |
% |
14.7 |
% |
(1.3) |
% |
|||||||
Gross margin |
34.9 |
% |
38.7 |
% |
36.9 |
% |
39.3 |
% |
|||||||
Operating margin |
6.5 |
% |
8.0 |
% |
8.9 |
% |
8.4 |
% |
|||||||
Earnings before taxes |
$ |
4,150 |
$ |
14,532 |
$ |
48,613 |
$ |
44,223 |
|||||||
Net income |
4,821 |
10,760 |
43,067 |
61,328 |
|||||||||||
Diluted earnings per share |
0.25 |
0.56 |
2.21 |
3.18 |
|||||||||||
Adjusted diluted earnings per share2 |
0.37 |
0.61 |
2.44 |
3.28 |
|||||||||||
Adjusted EBITDA2 |
29,601 |
32,683 |
132,614 |
114,869 |
|||||||||||
Cash and cash equivalents, end of period |
57,937 |
71,804 |
|||||||||||||
Backlog, end of period |
420,115 |
415,155 |
|||||||||||||
Total debt, end of period |
512,617 |
388,378 |
1 |
Revenue growth rates in fiscal year 2019 reflect the acquisitions of E2M Technologies B.V. (E2M) that occurred on November 21, 2018 and Endevco that occurred on August 5, 2019. |
2 |
Refer to the "Non-GAAP Financial Measures" section below for discussion of the calculation of these non-GAAP financial measures. |
EXECUTIVE COMMENTARY - DR.
"We executed very well this year on our growth and diversification strategy, delivering record revenue with double-digit top-line growth, along with adding two important simulation and sensing businesses to our company, E2M and Endevco. These acquisitions, in combination with our ongoing R&D investments, promise to bring exciting growth and profitability expansion to our company for years to come.
For fiscal year 2019, our Test & Simulation business drove top-line growth of over 20% compared to the prior year, with expansion to their operating margin. Our Sensors business delivered another record revenue performance with 7% growth and finished the year with a strong backlog that positions us for significant acceleration of growth in Sensors for fiscal year 2020. This top-line performance demonstrates the continued benefits of our diversification strategy, our success with new product introductions across all of our major end markets, and our ability to capitalize on rapidly expanding market opportunities in our Sensors business.
While we are excited about our top-line momentum, we continue to focus on our cost structure and in driving operational efficiencies in both businesses. These efforts contributed to a net income margin of 4.8% for the year and a 15.4% increase in Adjusted EBITDA, equating to an Adjusted EBITDA margin of 14.9% for the year. This solid performance supports our continued investments in new product development, diversification, and capital structure optimization, all while returning cash to our shareholders through our quarterly dividend.
As we enter our new fiscal year, we are excited about the resilience of our markets, our record year-end backlog, which topped
HIGHLIGHTS FOR THE 2019 FOURTH FISCAL QUARTER
Revenue
Revenue was
Orders
Test orders during the quarter were
Sensors orders during the quarter were
Net Income and Diluted Earnings Per Share
Diluted earnings per share was
Fourth quarter results were impacted by
Adjusted EBITDA
Adjusted EBITDA was
Balance Sheet
During the quarter, our total debt increased by
Dividend
The Board of Directors declared a quarterly dividend of $0.30 per share. The dividend was payable on September 30, 2019 to shareholders of record as of the close of business on September 16, 2019. This was our 151st consecutive quarterly dividend.
HIGHLIGHTS FOR THE 2019 FULL FISCAL YEAR
Revenue
Revenue was
Orders
Test orders for the fiscal year were
Sensors orders for the fiscal year were a record
Backlog
Backlog of
Net Income and Diluted Earnings Per Share
Diluted earnings per share was
Fiscal year 2019 results were impacted by
Adjusted EBITDA
Adjusted EBITDA was
OUTLOOK
Test & Simulation Business
Our performance for fiscal year 2019 sets us up for future growth in our Test & Simulation business. Future orders growth from strength in our simulation platforms, material testing and service offerings is expected to temper the headwinds experienced in the global economy. Overall, we anticipate challenges across all sectors stemming from a general weakening of the global economy, uncertainties surrounding tariffs and technology disruptions in the transportation market. We continue to benefit from the rapidly expanding use of advanced materials, such as carbon-fiber composites, the adoption of additive manufacturing methods for net-shape component fabrications, and the rapidly increasing complexity of ground and air vehicles which requires new simulation methods for determining product performance and life. Our energy and infrastructure markets remain robust, driven by continued growth in wind power and advanced building designs that are more resistant to damage from earthquakes, sea and storm events. The simulation market continues to benefit from increased demand for pilot training and rapid theme park expansions, which fits nicely with our expanded product offerings.
In addition to these growth opportunities, we continue to invest in operational efficiency initiatives to improve profitability, and to develop new products and technologies to drive margin expansion and to generate the highest demand for Test & Simulation products and services in the coming years.
Sensors Business
Our Sensors business demand is driven by accelerating new product introductions across all major markets and geographies, and expanded opportunities associated with the
Consolidated
Based on these factors, we introduce our expected outlook for fiscal year 2020 including:
Metric |
Current Outlook |
|
Revenue |
$955 million to $995 million |
|
Adjusted EBITDA |
$138 million to $158 million |
|
Diluted earnings per share |
$2.05 to $2.35 |
|
Adjusted diluted earnings per share |
$2.20 to $2.55 |
The above outlook includes:
$12.0 million to $16.0 million for stock-based compensation, acquisition-related and restructuring expenses;- Our most recent acquisition of Endevco sensors business;
- Our signing of the definitive agreement to purchase the six operating entities of R&D with an anticipated deal closure by
December 31, 2019 , subject to normal and customary closing procedures. If the deal does not close within our expected timeline, this could cause us to update our fiscal year 2020 guidance; and - An anticipated effective tax rate, excluding discrete tax items, of 15-19% for fiscal year 2020.
A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable GAAP financial measure, for the above outlook is included in Exhibit F of this earnings release.
FOURTH QUARTER CONFERENCE CALL
As announced on
Call toll free +1-800-367-2403 (international toll +1-334-777-6978) and reference the conference pass code 1642275. Telephone replay will be available at
A transcript of the call can also be accessed from the MTS website at http://investor.mts.com beginning on
ABOUT
NON-GAAP FINANCIAL MEASURES
We believe that disclosing adjusted diluted earnings per share, which is diluted earnings per share excluding the impact from restructuring / other expenses, acquisition-related expenses, acquisition integration expenses and acquisition inventory fair value adjustments is useful to investors as a measure of operating performance. We use this as one measure to monitor and evaluate operating performance. Adjusted diluted earnings per share 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 restructuring / other expenses, acquisition-related expenses, acquisition integration expenses and acquisition inventory fair value adjustments 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), EBITDA excluding the impact from stock-based compensation, restructuring / other expenses, acquisition-related expenses, acquisition integration expenses and acquisition inventory fair value adjustments (Adjusted EBITDA) and Adjusted EBITDA divided by revenue (Adjusted EBITDA margin) are useful to investors as a measure of leverage and operating performance. We use these measures to monitor and evaluate leverage and operating performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin 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, restructuring / other expenses, acquisition-related expenses, acquisition integration expenses and acquisition inventory fair value adjustments to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.
We believe that disclosing free cash flow is useful to investors as a measure of operating performance. We use this measure as an indicator of our strength and ability to generate cash. Free cash flow is a financial measure that does not reflect GAAP. We calculate free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment and businesses, net of cash acquired, plus cash proceeds from sales of property and equipment.
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, E, F and G of this earnings release.
FORWARD-LOOKING STATEMENTS
This earnings 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 this earnings release. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, statements about the opportunities and outlook for our Sensors and Test & Simulation sectors and other statements that are not historical facts. These statements are based on our 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 our 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 our most recent Annual Report on Form 10-K filed with the
MTS SYSTEMS CORPORATION |
|||||||||||||||
Consolidated Statements of Income |
|||||||||||||||
(unaudited - in thousands, except per share data) |
|||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||
September 28, 2019 |
September 29, 2018 |
September 28, 2019 |
September 29, 2018 |
||||||||||||
Revenue |
|||||||||||||||
Product |
$ |
194,716 |
$ |
171,046 |
$ |
782,012 |
$ |
674,391 |
|||||||
Service |
29,366 |
26,833 |
110,506 |
103,641 |
|||||||||||
Total revenue |
224,082 |
197,879 |
892,518 |
778,032 |
|||||||||||
Cost of sales |
|||||||||||||||
Product |
126,464 |
104,716 |
494,725 |
409,525 |
|||||||||||
Service |
19,446 |
16,671 |
68,863 |
62,978 |
|||||||||||
Total cost of sales |
145,910 |
121,387 |
563,588 |
472,503 |
|||||||||||
Gross profit |
78,172 |
76,492 |
328,930 |
305,529 |
|||||||||||
Gross margin |
34.9 |
% |
38.7 |
% |
36.9 |
% |
39.3 |
% |
|||||||
Operating expenses |
|||||||||||||||
Selling and marketing |
32,834 |
31,537 |
131,639 |
126,333 |
|||||||||||
General and administrative |
22,854 |
20,605 |
86,658 |
79,240 |
|||||||||||
Research and development |
7,920 |
8,549 |
30,928 |
34,784 |
|||||||||||
Total operating expenses |
63,608 |
60,691 |
249,225 |
240,357 |
|||||||||||
Income from operations |
14,564 |
15,801 |
79,705 |
65,172 |
|||||||||||
Operating margin |
6.5 |
% |
8.0 |
% |
8.9 |
% |
8.4 |
% |
|||||||
Interest expense, net |
(10,685) |
(6,121) |
(31,558) |
(25,882) |
|||||||||||
Other income (expense), net |
271 |
4,852 |
466 |
4,933 |
|||||||||||
Income before income taxes |
4,150 |
14,532 |
48,613 |
44,223 |
|||||||||||
Income tax provision (benefit) |
(671) |
3,772 |
5,546 |
(17,105) |
|||||||||||
Net income |
$ |
4,821 |
$ |
10,760 |
$ |
43,067 |
$ |
61,328 |
|||||||
Earnings per share |
|||||||||||||||
Basic |
|||||||||||||||
Earnings per share |
$ |
0.25 |
$ |
0.56 |
$ |
2.24 |
$ |
3.20 |
|||||||
Weighted average common shares outstanding |
19,268 |
19,206 |
19,258 |
19,163 |
|||||||||||
Diluted |
|||||||||||||||
Earnings per share |
$ |
0.25 |
$ |
0.56 |
$ |
2.21 |
$ |
3.18 |
|||||||
Weighted average common shares outstanding |
19,519 |
19,363 |
19,447 |
19,293 |
|||||||||||
Dividends declared per share |
$ |
0.30 |
$ |
0.30 |
$ |
1.20 |
$ |
1.20 |
MTS SYSTEMS CORPORATION |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(unaudited - in thousands) |
|||||||
September 28, 2019 |
September 29, 2018 |
||||||
ASSETS |
|||||||
Current assets |
|||||||
Cash and cash equivalents |
$ |
57,937 |
$ |
71,804 |
|||
Accounts receivable, net |
121,260 |
122,243 |
|||||
Unbilled accounts receivable, net |
80,331 |
70,474 |
|||||
Inventories, net |
167,199 |
139,109 |
|||||
Other current assets |
23,761 |
24,572 |
|||||
Total current assets |
450,488 |
428,202 |
|||||
Property and equipment, net |
101,083 |
90,269 |
|||||
Goodwill |
429,039 |
369,275 |
|||||
Intangible assets, net |
306,585 |
246,138 |
|||||
Other long-term assets |
10,782 |
5,512 |
|||||
Total assets |
$ |
1,297,977 |
$ |
1,139,396 |
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||
Current liabilities |
|||||||
Current maturities of long-term debt, net |
$ |
27,969 |
$ |
32,738 |
|||
Accounts payable |
46,849 |
47,886 |
|||||
Advance payments from customers |
70,520 |
80,131 |
|||||
Other accrued liabilities |
106,238 |
78,358 |
|||||
Total current liabilities |
251,576 |
239,113 |
|||||
Long-term debt, less current maturities |
484,648 |
355,640 |
|||||
Other long-term liabilities |
77,694 |
66,711 |
|||||
Total liabilities |
813,918 |
661,464 |
|||||
Shareholders' equity |
|||||||
Common stock, $0.25 par; 64,000 shares authorized: 19,124 and 17,856 shares issued and outstanding as of September 28, 2019 and September 29, 2018, respectively |
4,781 |
4,464 |
|||||
Additional paid-in capital |
182,422 |
171,407 |
|||||
Retained earnings |
315,329 |
300,585 |
|||||
Accumulated other comprehensive income (loss) |
(18,473) |
1,476 |
|||||
Total shareholders' equity |
484,059 |
477,932 |
|||||
Total liabilities and shareholders' equity |
$ |
1,297,977 |
$ |
1,139,396 |
MTS SYSTEMS CORPORATION |
|||||||||||||||
Condensed Consolidated Statements of Cash Flows |
|||||||||||||||
(unaudited - in thousands) |
|||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||
September 28, 2019 |
September 29, 2018 |
September 28, 2019 |
September 29, 2018 |
||||||||||||
Cash Flows from Operating Activities |
|||||||||||||||
Net income |
$ |
4,821 |
$ |
10,760 |
$ |
43,067 |
$ |
61,328 |
|||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities |
|||||||||||||||
Stock-based compensation |
2,099 |
1,905 |
9,397 |
7,283 |
|||||||||||
Fair value adjustment to acquired inventory |
460 |
— |
1,601 |
— |
|||||||||||
Depreciation and amortization |
9,822 |
8,634 |
37,975 |
34,492 |
|||||||||||
(Gain) loss on sale or disposal of property and equipment |
890 |
(4,333) |
1,442 |
(4,162) |
|||||||||||
Amortization of financing fees |
3,958 |
820 |
6,765 |
4,644 |
|||||||||||
Deferred income taxes |
(9,630) |
1,937 |
(11,060) |
(28,252) |
|||||||||||
Other |
770 |
1,215 |
2,227 |
3,338 |
|||||||||||
Changes in operating assets and liabilities |
10,303 |
(9,802) |
(17,951) |
(15,424) |
|||||||||||
Net Cash Provided by (Used in) Operating Activities |
23,493 |
11,136 |
73,463 |
63,247 |
|||||||||||
Cash Flows from Investing Activities |
|||||||||||||||
Purchases of property and equipment |
(13,148) |
(2,544) |
(30,525) |
(12,321) |
|||||||||||
Proceeds from sale of property and equipment |
— |
6,724 |
10 |
6,793 |
|||||||||||
Purchases of business, net of acquired cash |
(68,430) |
— |
(151,956) |
— |
|||||||||||
Other |
— |
— |
(285) |
823 |
|||||||||||
Net Cash Provided by (Used in) Investing Activities |
(81,578) |
4,180 |
(182,756) |
(4,705) |
|||||||||||
Cash Flows from Financing Activities |
|||||||||||||||
Proceeds from issuance of long-term debt |
350,000 |
— |
430,391 |
— |
|||||||||||
Payments on financing arrangements, net |
(303,956) |
(3,757) |
(313,177) |
(73,795) |
|||||||||||
Cash dividends |
(5,614) |
(5,402) |
(21,713) |
(21,360) |
|||||||||||
Proceeds from exercise of stock options and employee stock purchase plan |
1,738 |
291 |
3,435 |
1,992 |
|||||||||||
Payments to purchase and retire common stock |
(149) |
(97) |
(1,533) |
(1,403) |
|||||||||||
Net Cash Provided by (Used in) Financing Activities |
42,019 |
(8,965) |
97,403 |
(94,566) |
|||||||||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents |
(1,732) |
(950) |
(1,977) |
(905) |
|||||||||||
Cash and Cash Equivalents |
|||||||||||||||
Increase (decrease) during the period |
(17,798) |
5,401 |
(13,867) |
(36,929) |
|||||||||||
Balance, beginning of period |
75,735 |
66,403 |
71,804 |
108,733 |
|||||||||||
Balance, End of Period |
$ |
57,937 |
$ |
71,804 |
$ |
57,937 |
$ |
71,804 |
Exhibit A |
|||||||||||||||
MTS SYSTEMS CORPORATION |
|||||||||||||||
Segment Financial Information |
|||||||||||||||
(unaudited - in thousands) |
|||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||
September 28, 2019 |
September 29, 2018 |
September 28, |
September 29, 2018 |
||||||||||||
Test & Simulation Segment |
|||||||||||||||
Revenue |
$ |
133,988 |
$ |
120,428 |
$ |
558,908 |
$ |
464,924 |
|||||||
Cost of sales |
97,683 |
80,185 |
391,493 |
314,735 |
|||||||||||
Gross profit |
36,305 |
40,243 |
167,415 |
150,189 |
|||||||||||
Gross margin |
27.1 |
% |
33.4 |
% |
30.0 |
% |
32.3 |
% |
|||||||
Operating expenses |
33,664 |
33,795 |
133,335 |
130,964 |
|||||||||||
Income from operations |
$ |
2,641 |
$ |
6,448 |
$ |
34,080 |
$ |
19,225 |
|||||||
Sensors Segment |
|||||||||||||||
Revenue |
$ |
90,420 |
$ |
77,768 |
$ |
334,976 |
$ |
314,269 |
|||||||
Cost of sales |
48,550 |
41,515 |
173,466 |
158,896 |
|||||||||||
Gross profit |
41,870 |
36,253 |
161,510 |
155,373 |
|||||||||||
Gross margin |
46.3 |
% |
46.6 |
% |
48.2 |
% |
49.4 |
% |
|||||||
Operating expenses |
29,944 |
26,896 |
115,890 |
109,393 |
|||||||||||
Income from operations |
$ |
11,926 |
$ |
9,357 |
$ |
45,620 |
$ |
45,980 |
|||||||
Intersegment Eliminations |
|||||||||||||||
Revenue |
$ |
(326) |
$ |
(317) |
$ |
(1,366) |
$ |
(1,161) |
|||||||
Cost of sales |
(323) |
(313) |
(1,371) |
(1,128) |
|||||||||||
Gross profit |
(3) |
(4) |
5 |
(33) |
|||||||||||
Income (loss) from operations |
$ |
(3) |
$ |
(4) |
$ |
5 |
$ |
(33) |
|||||||
Total Company |
|||||||||||||||
Revenue |
$ |
224,082 |
$ |
197,879 |
$ |
892,518 |
$ |
778,032 |
|||||||
Cost of sales |
145,910 |
121,387 |
563,588 |
472,503 |
|||||||||||
Gross profit |
78,172 |
76,492 |
328,930 |
305,529 |
|||||||||||
Gross margin |
34.9 |
% |
38.7 |
% |
36.9 |
% |
39.3 |
% |
|||||||
Operating expenses |
63,608 |
60,691 |
249,225 |
240,357 |
|||||||||||
Income from operations |
$ |
14,564 |
$ |
15,801 |
$ |
79,705 |
$ |
65,172 |
Exhibit B |
|||||||||||||||||||
MTS SYSTEMS CORPORATION |
|||||||||||||||||||
Reconciliation of Earnings Per Share Excluding |
|||||||||||||||||||
Restructuring / Other, Acquisition-Related and Acquisition Inventory Fair Value Adjustments |
|||||||||||||||||||
(unaudited - in thousands, except per share data) |
|||||||||||||||||||
Three Months Ended |
|||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
||||||||||||||||||
Pre-tax |
Tax |
Net |
Pre-tax |
Tax |
Net |
||||||||||||||
Net income |
$ |
4,150 |
$ |
(671) |
$ |
4,821 |
$ |
14,532 |
$ |
3,772 |
$ |
10,760 |
|||||||
Restructuring / other expenses 1 |
700 |
162 |
538 |
1,387 |
357 |
1,030 |
|||||||||||||
Acquisition-related expenses2 |
1,805 |
379 |
1,426 |
— |
— |
— |
|||||||||||||
Acquisition inventory fair value adjustments1 |
460 |
97 |
363 |
— |
— |
— |
|||||||||||||
Adjusted net income3 |
$ |
7,115 |
$ |
(33) |
$ |
7,148 |
$ |
15,919 |
$ |
4,129 |
$ |
11,790 |
|||||||
Weighted average diluted common shares outstanding |
19,519 |
19,363 |
|||||||||||||||||
Diluted earnings per share |
$ |
0.21 |
$ |
(0.04) |
$ |
0.25 |
$ |
0.75 |
$ |
0.19 |
$ |
0.56 |
|||||||
Impact of restructuring / other expenses |
0.04 |
0.01 |
0.03 |
0.07 |
0.02 |
0.05 |
|||||||||||||
Impact of acquisition-related expenses |
0.09 |
0.02 |
0.07 |
— |
— |
— |
|||||||||||||
Impact of acquisition inventory fair value adjustments |
0.02 |
— |
0.02 |
— |
— |
— |
|||||||||||||
Adjusted diluted earnings per share3 |
$ |
0.36 |
$ |
(0.01) |
$ |
0.37 |
$ |
0.82 |
$ |
0.21 |
$ |
0.61 |
1 |
In determining the tax impact of restructuring / other expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred. |
|||||||||||||||||||
2 |
In determining the tax impact of acquisition-related expenses, we applied a U.S. effective income tax rate before discrete items to these expenses. |
|||||||||||||||||||
3 |
Denotes non-GAAP financial measure. |
Exhibit C |
|||||||||||||||||||
MTS SYSTEMS CORPORATION |
|||||||||||||||||||
Reconciliation of Earnings Per Share Excluding |
|||||||||||||||||||
Restructuring / Other, Acquisition-Related and Acquisition Inventory Fair Value Adjustments |
|||||||||||||||||||
Twelve Months Ended |
|||||||||||||||||||
September 28, 2019 |
September 29, 2018 |
||||||||||||||||||
Pre-tax |
Tax |
Net |
Pre-tax |
Tax |
Net |
||||||||||||||
Net income |
$ |
48,613 |
$ |
5,546 |
$ |
43,067 |
$ |
44,223 |
$ |
(17,105) |
$ |
61,328 |
|||||||
Restructuring / other expenses1 |
830 |
195 |
635 |
2,730 |
697 |
2,033 |
|||||||||||||
Acquisition-related expenses2 |
2,938 |
617 |
2,321 |
— |
— |
— |
|||||||||||||
Acquisition inventory fair value adjustments1 |
1,601 |
269 |
1,332 |
— |
— |
— |
|||||||||||||
Adjusted net income3 |
$ |
53,982 |
$ |
6,627 |
$ |
47,355 |
$ |
46,953 |
$ |
(16,408) |
$ |
63,361 |
|||||||
Weighted average diluted common shares outstanding |
19,447 |
19,293 |
|||||||||||||||||
Diluted earnings per share |
$ |
2.50 |
$ |
0.29 |
$ |
2.21 |
$ |
2.29 |
$ |
(0.89) |
$ |
3.18 |
|||||||
Impact of restructuring / other expenses |
0.04 |
0.01 |
0.03 |
0.14 |
0.04 |
0.10 |
|||||||||||||
Impact of acquisition-related expenses |
0.15 |
0.02 |
0.13 |
— |
— |
— |
|||||||||||||
Impact of acquisition inventory fair value adjustments |
0.08 |
0.01 |
0.07 |
— |
— |
— |
|||||||||||||
Adjusted diluted earnings per share3 |
$ |
2.77 |
$ |
0.33 |
$ |
2.44 |
$ |
2.43 |
$ |
(0.85) |
$ |
3.28 |
1 |
In determining the tax impact of restructuring / other expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred. |
|||||||||||||||||||
2 |
In determining the tax impact of acquisition-related expenses, we applied a U.S. effective income tax rate before discrete items to these expenses. |
|||||||||||||||||||
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 |
||||||||||||||
September 28, |
September 29, |
September 28, |
September 29, |
||||||||||||
Net income |
$ |
4,821 |
$ |
10,760 |
$ |
43,067 |
$ |
61,328 |
|||||||
Net income margin |
2.2 |
% |
5.4 |
% |
4.8 |
% |
7.9 |
% |
|||||||
Income tax provision (benefit) |
(671) |
3,772 |
5,546 |
(17,105) |
|||||||||||
Interest expense, net |
10,685 |
6,121 |
31,558 |
25,882 |
|||||||||||
Depreciation and amortization |
9,822 |
8,634 |
37,975 |
34,492 |
|||||||||||
EBITDA 1 |
24,657 |
29,287 |
118,146 |
104,597 |
|||||||||||
Stock-based compensation |
2,099 |
1,905 |
9,397 |
7,283 |
|||||||||||
Restructuring / other expenses 2 |
700 |
1,491 |
830 |
2,989 |
|||||||||||
Acquisition-related expenses 3 |
1,685 |
— |
2,640 |
— |
|||||||||||
Acquisition inventory fair value adjustments |
460 |
— |
1,601 |
— |
|||||||||||
Adjusted EBITDA 1 |
$ |
29,601 |
$ |
32,683 |
$ |
132,614 |
$ |
114,869 |
|||||||
Adjusted EBITDA margin 1,4 |
13.2 |
% |
16.5 |
% |
14.9 |
% |
14.8 |
% |
1 |
Denotes non-GAAP financial measures. |
|||||||||||||||
2 |
Restructuring / other expenses were adjusted to exclude stock-based compensation forfeitures and depreciation expense that are otherwise included in the stock-based compensation line and depreciation and amortization line. |
|||||||||||||||
3 |
Acquisition-related expenses include acquisition and integration expenses associated with the E2M and Endevco acquisitions. They were adjusted to exclude stock-based compensation that is otherwise included in the stock-based compensation line. |
|||||||||||||||
4 |
Adjusted EBITDA was divided by revenue to calculate Adjusted EBITDA margin. |
Exhibit E |
|||||||||||||||
MTS SYSTEMS CORPORATION |
|||||||||||||||
Free Cash Flow |
|||||||||||||||
(unaudited - in thousands) |
|||||||||||||||
Three Months Ended |
Twelve Months Ended |
||||||||||||||
September 28, |
September 29, |
September 28, |
September 29, |
||||||||||||
Net Cash Provided by (Used in) Operating Activities |
$ |
23,493 |
$ |
11,136 |
$ |
73,463 |
$ |
63,247 |
|||||||
Purchases of property and equipment |
(13,148) |
(2,544) |
(30,525) |
(12,321) |
|||||||||||
Proceeds from sale of property and equipment |
— |
6,724 |
10 |
6,793 |
|||||||||||
Free cash flow1 |
$ |
10,345 |
$ |
15,316 |
$ |
42,948 |
$ |
57,719 |
1 |
Denotes non-GAAP financial measures. |
Exhibit F |
|||||||
MTS SYSTEMS CORPORATION |
|||||||
Reconciliation of EBITDA and Adjusted EBITDA to Net Income - Outlook |
|||||||
(unaudited - in thousands) |
|||||||
Twelve Months Ending |
|||||||
October 3, 2020 |
|||||||
Low |
High |
||||||
Net income |
$ |
40,300 |
$ |
46,200 |
|||
Income tax provision (benefit)1 |
8,700 |
11,000 |
|||||
Interest expense, net |
35,100 |
37,200 |
|||||
Depreciation and amortization |
41,900 |
47,600 |
|||||
EBITDA2 |
126,000 |
142,000 |
|||||
Stock-based compensation and non-recurring expenses3 |
12,000 |
16,000 |
|||||
Adjusted EBITDA2 |
$ |
138,000 |
$ |
158,000 |
1 |
Applied anticipated tax rate, excluding discrete tax items, of approximately 15-19%. |
|||||||
2 |
Denotes non-GAAP financial measures. |
|||||||
3 |
Includes pre-tax forecast expenses for stock-based compensation, acquisition-related and restructuring expenses. |
Exhibit G |
|||||||
MTS SYSTEMS CORPORATION |
|||||||
Reconciliation of Diluted Earnings per Share and Adjusted Diluted Earnings per Share - Outlook |
|||||||
(unaudited - in thousands) |
|||||||
Twelve Months Ending |
|||||||
October 3, 2020 |
|||||||
Low |
High |
||||||
Net income1 |
$ |
40,300 |
$ |
46,200 |
|||
Non-recurring expenses, net of tax 2, 3 |
3,000 |
4,000 |
|||||
Adjusted net income4 |
$ |
43,300 |
$ |
50,200 |
|||
Weighted average diluted common shares outstanding |
19,700 |
19,700 |
|||||
Diluted earnings per share |
$ |
2.05 |
$ |
2.35 |
|||
Impact of non-recurring expenses2 |
0.15 |
0.20 |
|||||
Adjusted diluted earnings per share4 |
$ |
2.20 |
$ |
2.55 |
1 |
Refer to Exhibit F for tax impact on net income guidance. |
|||||||
2 |
Includes forecast expenses for restructuring expenses, acquisition-related expenses and acquisition inventory fair value adjustment, net of tax. |
|||||||
3 |
Applied anticipated tax rate, excluding discrete tax items, of approximately 15-19%. |
|||||||
4 |
Denotes non-GAAP financial measures. |
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SOURCE
INVESTOR RELATIONS CONTACT: Brian Ross, Executive Vice President and Chief Financial Officer, brian.ross@mts.com, (952) 937-4000