MTS Reports Fiscal 2020 Second Quarter Financial Results

May 4, 2020 4:05 PM EDT

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EDEN PRAIRIE, Minn., May 4, 2020 /PRNewswire/ -- MTS Systems Corporation (Nasdaq: MTSC), a leading global supplier of high-performance test systems, motion simulators and sensors, today reported financial results for its fiscal year 2020 second quarter ended March 28, 2020.

SECOND QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

  • Record orders of $277.4 million, an increase of 31.1%, reflecting record orders in both our Test & Simulation and Sensors Business Units
  • Backlog strong at $500.1 million, an increase of 1.4% over prior year
  • Revenue of $211.5 million, a decline of 9.3%
  • Sensors revenue growth of 4.6%
  • GAAP diluted loss per share of $(0.06), reflecting the impact of the restructuring actions taken amidst economic uncertainty
  • Adjusted diluted earnings per share of $0.27, including $0.26 of amortization expense

FINANCIAL TABLE

Three Months Ended

Six Months Ended

 

(in thousands, except per share data - unaudited)

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Revenue

$

211,463

$

233,046

$

417,306

$

436,227

Revenue % increase (decrease)

(9.3)

%

21.8

%

(4.3)

%

13.2

%

Gross margin

33.7

%

37.5

%

35.4

%

38.0

%

Operating margin

3.8

%

10.4

%

5.5

%

9.7

%

Earnings (loss) before taxes

$

(1,069)

$

17,076

$

5,386

$

28,273

Net income (loss)

(1,071)

14,160

4,235

24,661

Diluted earnings (loss) per share

(0.06)

0.73

0.22

1.27

Adjusted diluted earnings per share1

0.27

0.76

0.64

1.36

Adjusted EBITDA1

31,527

37,554

61,154

67,656

Cash and cash equivalents, end of period

66,582

74,122

Backlog, end of period

500,135

493,468

Total debt, end of period

600,592

464,420

1

Refer to the "Non-GAAP Financial Measures" section below for discussion of the calculation of these non-GAAP financial measures.

EXECUTIVE COMMENTARY - DR. JEFFREY GRAVES, PRESIDENT AND CHIEF EXECUTIVE OFFICER

"As we confront the ongoing effects of the global COVID-19 pandemic, we are focused on protecting the well-being of our employees and continuing to service our long-standing customer base while managing our cash, maximizing liquidity, and reducing our cost infrastructure. Despite the pandemic's impact, we achieved record orders in the second quarter in both our Test & Simulation and Sensors businesses and a near-record backlog. Notably, our Test & Simulation segment was awarded the largest order in MTS history for an advanced seismic simulation system in China, valued at over $70 million. These results demonstrate the mission-critical nature of our offering and our customers' long-term commitment to new product development.

Towards the end of the quarter, we saw softer demand as the pandemic forced many customers to temporarily shut down their operations and delay orders. Additionally, temporary closures of some of our facilities as well as government restrictions on cross-border access created logistical delays and further limited our employees' access to customers. Nevertheless, as an essential critical infrastructure business, we are continuing to serve clients in the U.S. and in other parts of the world as permissible.

We continue to act decisively to mitigate COVID-19's impact on our business. While the decision to restructure the business and reduce costs was difficult, we completed these initiatives rapidly to improve operating efficiencies and strengthen our financial position. We took further short-term cost actions, including implementing furloughs, extending paid time-off, and reducing work schedules, to address the immediate effects of the virus' impact on our customers, our suppliers and our internal operations. We suspended our dividend to maximize liquidity, helping ensure that we are able to meet our financial obligations while continuing to make the most critical investments in our business.

We remain confident we will emerge from this crisis stronger owing to our highly diverse customer base, our broad geographic footprint, and the critical nature of the MTS product portfolio relative to the markets we serve. While the duration and scale of COVID-19's economic impact remains unknown, we believe companies globally will continue to prioritize R&D over the long-term and that we are uniquely positioned to shorten their development cycles and decrease their costs, supporting their product development and ultimately their success."

HIGHLIGHTS FOR THE 2020 SECOND FISCAL QUARTER

Revenue

Revenue was $211.5 million, down 9.3% compared to the same prior year period, driven by a decline in Test & Simulation, partially offset by growth in Sensors. Test & Simulation revenue decreased primarily due to a decline in volume from the continued weakness in our ground vehicles sector and lower service volume, which was negatively impacted by COVID-19 due to the closure of customer sites. The decline was partially offset by contributions from the acquisition of the R&D entities in Denmark (R&D) of $14.7 million, which was completed early in the second quarter, and volume growth in our structures sector. Sensors experienced continued revenue growth primarily driven by strong global demand in our test sector, which included continued U.S. Department of Defense volume growth and the addition of Endevco, which closed during the fourth quarter of fiscal year 2019. Sensors growth was partially offset by weakness in the other three Sensors sectors driven largely by COVID-19.

Orders

Test & Simulation orders for the quarter were a record at $176.5 million, up 33.6% compared to the same prior year period. This performance was primarily driven by the award of the largest order in MTS history for an advanced seismic simulation system in China, valued at over $70 million, and the addition of wind energy orders from the acquisition of R&D. The increase was partly offset by lower orders in our ground vehicles sector, materials sector and services reflecting the global impact of COVID-19.

Sensors orders for the quarter were $100.9 million, a 27.1% increase compared to the same prior year period primarily driven by additional funding associated with the U.S. Department of Defense, the addition of orders from the acquisition of Endevco and growth in our systems sector. The increase was partially offset by continued weakness in our position and industrial sectors, primarily in Europe.

Backlog

Backlog of $500.1 million, the second highest in MTS history, was up 1.4% compared to the same prior year period. Sequentially, from the first quarter of fiscal year 2020, backlog was up 26.3% driven by the record orders performance in both of our business units. Ending backlog for Test & Simulation and Sensors was $412.1 million and $88.0 million, respectively.

Net Income and Diluted Earnings Per Share

GAAP diluted earnings (loss) per share was $(0.06) compared to $0.73 in the same prior year period on net income (loss) of $(1.1) million and $14.2 million, respectively. The $0.79 decrease was primarily driven by a decline in Test & Simulation gross profit from depressed revenue volume reflecting the impact of COVID-19, higher restructuring costs from actions taken in the second quarter to manage and reduce operating costs, lower Sensors gross profit from unfavorable product mix, higher interest expense on increased debt levels and slightly higher operating expenses in Sensors mainly from the acquisition of Endevco. The decline was partially offset by lower compensation expense in both businesses from cost containment measures and a reduction in the effective tax rate.

Second quarter of fiscal year 2020 and 2019 results include $0.33 and $0.03, respectively, of non-recurring costs associated with restructuring actions taken in the second quarter of fiscal year 2020, and acquisition-related expenses and acquisition inventory fair value adjustment from the acquisitions of R&D in the second quarter of fiscal year 2020 and E2M and Endevco in the first and fourth quarters of fiscal year 2019, respectively. Adjusting for these items, adjusted diluted earnings per share was $0.27 for the second quarter of fiscal 2020, and $0.76 for the same period in the prior year. A reconciliation of adjusted diluted earnings per share, a non-GAAP financial measure, to diluted earnings per share, the most directly comparable GAAP financial measure, is provided in Exhibits B and C of this earnings release. Our diluted earnings per share and adjusted earnings per share include the amortization of purchased intangible assets of $0.26 and $0.18 for the three-months ended March 28, 2020 and March 30, 2019, respectively. We incurred pre-tax amortization expense of $6.3 million ($5.0 million post-tax) and $4.4 million ($3.5 million post-tax) for the three-months ended March 28, 2020 and March 30, 2019, respectively, in relation to companies that we have acquired.

Adjusted EBITDA

Adjusted EBITDA declined to $31.5 million in the second quarter of fiscal year 2020, down 16.0% compared to the same prior year period. This decrease was primarily due to a decline in Test & Simulation gross profit from lower revenue volumes reflecting the impact of COVID-19, unfavorable Sensors product mix and higher Sensors operating expenses mainly from the acquisition of Endevco. The decline was partially offset by lower compensation expense in both businesses and cost containment measures. A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable GAAP financial measure, is provided in Exhibit D of this earnings release.

Coronavirus 2019 (COVID-19) Pandemic

The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. As an essential critical infrastructure business, we have continued to operate in the U.S. and plan to continue to operate in other parts of the world as permitted. Restrictions on our employees' ability to access our customers and the temporary closures of our facilities or the facilities of our customers negatively impacted our sales and operating results for the second quarter of fiscal year 2020. We anticipate these challenges to continue to negatively impact our fiscal year 2020 revenue and operating results. The future impact COVID-19 will have on our business, operations and financial results is unknown at this time, and we are unable to accurately quantify the impact due to the significant global economic uncertainty. In response, we continue to right-size our operations and manage short-term business risk to allow for bottom-line improvement through the execution of cost savings initiatives previously communicated.

Cost Reductions and Restructuring Actions

Although we believe our financial position is strong, given the level of economic uncertainty, our cost reduction actions provide an increased level of flexibility during these challenging times. We expect to incur total restructuring charges of approximately $8 million to $12 million, which includes approximately $7.0 million to $10.6 million for the reorganization of our Test & Simulation European operations previously announced, during fiscal year 2020 and fiscal year 2021 based on notice period requirements, of which $6.1 million was incurred and recognized in the second quarter of fiscal year 2020. These cost reductions are permanent changes to our business and were focused at reorganization efforts to more efficiently service our customers. We expect these actions to yield annual cost savings exceeding $10 million once fully implemented by the end of fiscal year 2020.

Additionally, we have implemented temporary, incremental cost reduction measures that will provide for further short-term flexibility and will remain in place until we begin to see marked improvement in the markets we serve. These temporary measures will save at least $5 million through the end of fiscal year 2020.

Our combined permanent restructuring actions and temporary cost reduction measures will reduce our expense infrastructure exceeding $10 million through the end of fiscal year 2020. While we expect these actions will be sufficient to provide the needed flexibility to weather the current economic environment, we continue to evaluate the ongoing impact of COVID-19 and may need to take further cost reduction actions or other actions in the future.

Balance Sheet and Liquidity Estimates

During the quarter, our total debt balance increased by $59.9 million to $600.6 million, due to the closing of the acquisition of the R&D entities in Denmark. We ended the quarter with $66.6 million of cash on the balance sheet, leading to a net debt balance of $534.0 million. The ratio of interest-bearing debt to Adjusted EBITDA and the ratio of net interest-bearing debt to Adjusted EBITDA remain in full compliance with the debt covenant levels specified in our debt agreements and debt maturities not occurring until July 2023 and August 2027.

"Our liquidity position remains sound, with over $100M including cash and undrawn credit available through our revolving facility. We continue to maintain a constructive dialogue with lenders and are confident in our ability to access additional capital if needed to preserve the near-term strength of the business and make critical investments to position us for future growth opportunities," stated Brian Ross, Executive Vice President and Chief Financial Officer.

Dividend Suspension

During the second quarter of fiscal year 2020, the Board of Directors declared a quarterly dividend of $0.30 per share. The dividend was paid on March 30, 2020 to shareholders of record as of the close of business on March 16, 2020. As previously announced on April 16, 2020, we are suspending our quarterly dividend of $0.30 per share, equating to approximately $23.0 million in annualized cash payments. The suspension of our dividend helps us maximize our liquidity for the foreseeable future as we face uncertain economic times. Our Board of Directors remains committed to maximizing value to shareholders in the most efficient and effective way possible and will consider future dividends and share repurchases as the economic landscape and visibility improves.

Guidance Suspension

Consistent with our announcement on April 16, 2020, given the continued uncertainties in the business environment, we remain unable to accurately predict the specific extent, or duration, of the impact of COVID-19 on our financial results. As a result, financial guidance has been withdrawn for fiscal year 2020.

SECOND QUARTER CONFERENCE CALL

As announced on April 21, 2020, a conference call will be held on May 5, 2020 (tomorrow), at 10:00 a.m. ET (9:00 a.m. CT). Dr. Jeffrey A. Graves, President and Chief Executive Officer, and Brian T. Ross, Executive Vice President and Chief Financial Officer, will host the call, which will include a question and answer session after prepared remarks.

Call toll free +1-800-367-2403 (international toll +1-334-777-6978) and reference the conference pass code 3918217. The conference call replay will be available at 1:00 p.m. ET following the call until 1:00 p.m. ET, May 12, 2020. Call toll free +1-888-203-1112 and reference the conference pass code 3918217.

A transcript of the call can also be accessed from the MTS website at http://investor.mts.com/events-and-presentations/presentations beginning on May 6, 2020.

ABOUT MTS SYSTEMS CORPORATION

MTS Systems Corporation's testing and simulation hardware, software and service 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 sensors provide measurements of vibration, pressure, position, force and sound in a variety of applications. MTS had 3,500 employees as of September 28, 2019 and revenue of $893 million for the fiscal year ended September 28, 2019. Additional information on MTS can be found at www.mts.com.

NON-GAAP FINANCIAL MEASURES

We believe that disclosing adjusted diluted earnings per share, which is diluted earnings per share excluding the impact from restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment 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 expenses, acquisition-related expenses and the acquisition inventory fair value adjustment 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 expenses, acquisition-related expenses and the acquisition inventory fair value adjustment (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 expenses, acquisition-related expenses and the acquisition inventory fair value adjustment 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 and E 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, statements about the impact of COVID-19 and related economic uncertainty, 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, the currently-unknown impact of COVID-19 and related economic uncertainty and those described in the "Risk Factors" section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and updated in any subsequent Quarterly Reports on Form 10-Q and other filings with the SEC. The reports referenced above are available on our website at www.mts.com or on the SEC's website at www.sec.gov. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances.

 

 MTS SYSTEMS CORPORATION

 Consolidated Statements of Income

 (unaudited - in thousands, except per share data)

Three Months Ended

Six Months Ended

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Revenue

Product

$

183,223

$

206,690

$

362,081

$

381,769

Service

28,240

26,356

55,225

54,458

Total revenue

211,463

233,046

417,306

436,227

Cost of sales

Product

121,206

129,579

232,845

237,746

Service

19,016

16,117

36,611

32,826

Total cost of sales

140,222

145,696

269,456

270,572

Gross profit

71,241

87,350

147,850

165,655

 Gross margin

33.7

%

37.5

%

35.4

%

38.0

%

Operating expenses

Selling and marketing

30,131

33,395

62,850

65,484

General and administrative

25,997

22,105

47,690

43,183

 Research and development

7,143

7,676

14,182

14,848

 Total operating expenses

63,271

63,176

124,722

123,515

Income from operations

7,970

24,174

23,128

42,140

 Operating margin

3.8

%

10.4

%

5.5

%

9.7

%

Interest income (expense), net

(8,857)

(7,368)

(17,129)

(14,186)

Other income (expense), net

(182)

270

(613)

319

Income (loss) before income taxes

(1,069)

17,076

5,386

28,273

Income tax provision

2

2,916

1,151

3,612

Net income (loss)

$

(1,071)

$

14,160

$

4,235

$

24,661

Earnings per share

 Basic

 Earnings (loss) per share

$

(0.06)

$

0.74

$

0.22

$

1.28

 Weighted average common shares outstanding

19,193

19,251

19,169

19,234

 Diluted

 Earnings (loss) per share

$

(0.06)

$

0.73

$

0.22

$

1.27

 Weighted average common shares outstanding

19,361

19,441

19,361

19,393

Dividends declared per share

$

0.30

$

0.30

$

0.60

$

0.60

 

 MTS SYSTEMS CORPORATION

 Condensed Consolidated Balance Sheets

 (unaudited - in thousands)

March 28, 2020

September 28, 2019

 ASSETS

 Current assets

Cash and cash equivalents

$

66,582

$

57,937

 Accounts receivable, net

122,207

121,260

Unbilled accounts receivable, net

82,274

80,331

Inventories, net

180,191

167,199

Prepaid expenses and other current assets

28,331

23,761

 Total current assets

479,585

450,488

 Property and equipment, net

101,856

101,083

 Goodwill

465,411

429,039

 Intangible assets, net

344,351

306,585

 Other long-term assets

32,645

10,782

 Total assets

$

1,423,848

$

1,297,977

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities

 Short-term borrowings

$

32,000

$

 Current maturities of long-term debt, net

2,818

27,969

 Accounts payable

59,107

46,849

 Advance payments from customers

67,323

70,520

 Other accrued liabilities

99,140

106,238

 Total current liabilities

260,388

251,576

 Long-term debt, less current maturities, net

565,774

484,648

 Other long-term liabilities

116,008

77,694

 Total liabilities

942,170

813,918

 Shareholders' equity

 Common stock, $0.25 par; 64,000 shares authorized:

19,188 and 19,124 shares issued and outstanding as

of March 28, 2020 and September 28, 2019, respectively

4,797

4,781

 Additional paid-in capital

187,551

182,422

 Retained earnings

308,055

315,329

 Accumulated other comprehensive income (loss)

(18,725)

(18,473)

 Total shareholders' equity

481,678

484,059

 Total liabilities and shareholders' equity

$

1,423,848

$

1,297,977

 

 MTS SYSTEMS CORPORATION

Condensed Consolidated Statements of Cash Flows

 (unaudited - in thousands)

Three Months Ended

Six Months Ended

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Cash Flows from Operating Activities

Net income

$

(1,071)

$

14,160

$

4,235

$

24,661

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Stock-based compensation

2,928

2,895

5,095

4,689

Fair value adjustment to acquired inventory

600

539

1,140

984

Depreciation

6,407

5,105

12,069

10,249

Amortization

6,270

4,403

11,055

8,219

Accretion of contingent consideration

456

456

(Gain) loss on sale or disposal of property and equipment

438

349

1,050

510

Amortization of debt issuance costs

577

1,039

1,444

2,099

Deferred income taxes

827

15

893

(1,243)

Other

(240)

659

(238)

1,087

Changes in operating assets and liabilities

(14,028)

(9,126)

(39,778)

(20,586)

Net Cash Provided by (Used in) Operating Activities

3,164

20,038

(2,579)

30,669

Cash Flows from Investing Activities

Purchases of property and equipment

(5,709)

(5,576)

(16,281)

(9,349)

Proceeds from sale of property and equipment

10

Purchases of business, net of acquired cash

(48,104)

(3,794)

(48,104)

(81,826)

Other

(285)

Net Cash Provided by (Used in) Investing Activities

(53,813)

(9,370)

(64,385)

(91,450)

Cash Flows from Financing Activities

Proceeds from issuance of long-term debt

58,576

58,576

80,391

(Payments on) proceeds from financing arrangements, net

718

(2,664)

28,783

(6,783)

Cash dividends

(5,747)

(5,365)

(11,486)

(10,724)

Proceeds from exercise of stock options and employee stock purchase plan

590

663

631

701

Payments to purchase and retire common stock

(38)

(42)

(873)

(398)

Net Cash Provided by (Used in) Financing Activities

54,099

(7,408)

75,631

63,187

Effect of Exchange Rate Changes on Cash and Cash Equivalents

(939)

424

(22)

(88)

Increase (decrease) in cash and cash equivalents during the period

2,511

3,684

8,645

2,318

Cash and cash equivalents balance, beginning of period

64,071

70,438

57,937

71,804

Cash and cash equivalents balance, end of period

$

66,582

$

74,122

$

66,582

$

74,122

 

Exhibit A

MTS SYSTEMS CORPORATION

Segment Financial Information

(unaudited - in thousands)

Three Months Ended

Six Months Ended

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Test & Simulation Segment

Revenue

$

125,497

$

151,032

$

246,227

$

276,592

Cost of sales

92,388

103,742

176,148

189,757

Gross profit

33,109

47,290

70,079

86,835

Gross margin

26.4

%

31.3

%

28.5

%

31.4

%

Operating expenses

33,914

34,606

63,888

66,820

Income (loss) from operations

$

(805)

$

12,684

$

6,191

$

20,015

Sensors Segment

Revenue

$

86,198

$

82,375

$

171,733

$

160,325

Cost of sales

48,062

42,301

93,961

81,492

Gross profit

38,136

40,074

77,772

78,833

Gross margin

44.2

%

48.6

%

45.3

%

49.2

%

Operating expenses

29,357

28,570

60,834

56,695

Income from operations

$

8,779

$

11,504

$

16,938

$

22,138

Intersegment Eliminations

Revenue

$

(232)

$

(361)

$

(654)

$

(690)

Cost of sales

(228)

(347)

(653)

(677)

Gross profit

(4)

(14)

(1)

(13)

Income (loss) from operations

$

(4)

$

(14)

$

(1)

$

(13)

Total Company

Revenue

$

211,463

$

233,046

$

417,306

$

436,227

Cost of sales

140,222

145,696

269,456

270,572

Gross profit

71,241

87,350

147,850

165,655

Gross margin

33.7

%

37.5

%

35.4

%

38.0

%

Operating expenses

63,271

63,176

124,722

123,515

Income from operations

$

7,970

$

24,174

$

23,128

$

42,140

 

Exhibit B

MTS SYSTEMS CORPORATION

Reconciliation of Adjusted Diluted Earnings Per Share

(unaudited - in thousands, except per share data)

Three Months Ended

March 28, 2020

March 30, 2019

Pre-Tax

Tax

Net

Pre-Tax

Tax

Net

Net income (loss)

$

(1,069)

$

2

$

(1,071)

$

17,076

$

2,916

$

14,160

Restructuring expenses 1

6,138

1,788

4,350

Acquisition-related expenses 1

1,878

409

1,469

262

55

207

Acquisition inventory fair value adjustment 1

600

126

474

539

81

458

Adjusted net income 2

$

7,547

$

2,325

$

5,222

$

17,877

$

3,052

$

14,825

Weighted average diluted common shares outstanding

19,361

19,441

Diluted earnings (loss) per share

$

(0.06)

$

$

(0.06)

$

0.88

$

0.15

$

0.73

Impact of restructuring expenses

0.32

0.10

0.22

Impact of acquisition-related expenses

0.11

0.02

0.09

0.01

0.01

Impact of acquisition inventory fair value adjustment

0.03

0.01

0.02

0.03

0.01

0.02

Adjusted diluted earnings per share2

$

0.40

$

0.13

$

0.27

$

0.92

$

0.16

$

0.76

1   In determining the tax impact of restructuring expenses, acquisition-related expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.

2   Denotes non-GAAP financial measure.

 

Exhibit C

MTS SYSTEMS CORPORATION

Reconciliation of Earnings Per Share Excluding Restructuring, Acquisition-Related

and Acquisition Inventory Fair Value Adjustment Expenses

(unaudited - in thousands, except per share data)

Six Months Ended

March 28, 2020

March 30, 2019

Pre-Tax

Tax

Net

Pre-Tax

Tax

Net

Net income

$

5,386

$

1,151

$

4,235

$

28,273

$

3,612

$

24,661

Restructuring expenses 1

6,138

1,788

4,350

130

33

97

Acquisition-related expenses 1

3,624

775

2,849

1,035

217

818

Acquisition inventory fair value adjustment 1

1,140

239

901

984

148

836

Adjusted net income 2

$

16,288

$

3,953

$

12,335

$

30,422

$

4,010

$

26,412

Weighted average diluted common shares outstanding

19,361

19,393

Diluted earnings per share

$

0.28

$

0.06

$

0.22

$

1.46

$

0.19

$

1.27

Impact of restructuring expenses

0.32

0.10

0.22

0.01

0.01

Impact of acquisition-related expenses

0.19

0.04

0.15

0.05

0.01

0.04

Impact of acquisition inventory fair value adjustment

0.06

0.01

0.05

0.05

0.01

0.04

Adjusted diluted earnings per share2

$

0.85

$

0.21

$

0.64

$

1.57

$

0.21

$

1.36

1   In determining the tax impact of restructuring expenses, acquisition-related expenses and acquisition inventory fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.

2   Denotes non-GAAP financial measure.

 

Exhibit D

MTS SYSTEMS CORPORATION

Reconciliation of EBITDA and Adjusted EBITDA

(unaudited - in thousands)

Three Months Ended

Six Months Ended

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Net income (loss)

$

(1,071)

$

14,160

$

4,235

$

24,661

Net income margin

(0.5)

%

6.1

%

1.0

%

5.7

%

Income tax provision

2

2,916

1,151

3,612

Interest expense, net

8,857

7,368

17,129

14,186

Depreciation

6,407

5,105

12,069

10,249

Amortization

6,270

4,403

11,055

8,219

EBITDA 1

20,465

33,952

45,639

60,927

Stock-based compensation

2,928

2,895

5,095

4,689

Restructuring expenses

6,138

6,138

130

Acquisition-related expenses 2

1,396

168

3,142

926

Acquisition inventory fair value adjustment

600

539

1,140

984

Adjusted EBITDA 1

$

31,527

$

37,554

$

61,154

$

67,656

Adjusted EBITDA margin 1,3

14.9

%

16.1

%

14.7

%

15.5

%

1   Denotes non-GAAP financial measure.

2   Acquisition-related expenses were adjusted to exclude stock-based compensation that is otherwise included in the stock-based compensation line and interest expense that is otherwise included in the interest expense, net line.

3   Adjusted EBITDA was divided by revenue when calculating the Adjusted EBITDA margin.

 

Exhibit E

MTS SYSTEMS CORPORATION

Reconciliation of Free Cash Flow

(unaudited - in thousands)

Three Months Ended

Six Months Ended

March 28, 2020

March 30, 2019

March 28, 2020

March 30, 2019

Net Cash Provided by (Used in) Operating Activities

$

3,164

$

20,038

$

(2,579)

$

30,669

Purchases of property and equipment

(5,709)

(5,576)

(16,281)

(9,349)

Proceeds from sale of property and equipment

10

Free cash flow1

$

(2,545)

$

14,462

$

(18,860)

$

21,330

1   Denotes non-GAAP financial measure.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/mts-reports-fiscal-2020-second-quarter-financial-results-301051995.html

SOURCE MTS Systems Corporation



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