MTS Reports Fiscal 2020 Third Quarter Financial Results

August 3, 2020 4:05 PM EDT

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EDEN PRAIRIE, Minn., Aug. 3, 2020 /PRNewswire/ -- MTS Systems Corporation (Nasdaq: MTSC), a leading global supplier of advanced test systems, motion simulators and precision sensors, today reported financial results for its fiscal year 2020 third quarter ended June 27, 2020.

THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

  • Positive operating cash flow of $16.0 million
  • Backlog of $451.4 million, an increase of 1.8% over prior year
  • Revenue of $196.2 million, a decline of 15.5% over prior year, reflecting the global impact of the COVID-19 pandemic
  • GAAP diluted earnings per share of $0.23, including $0.08 of discrete tax benefits
  • Adjusted diluted earnings per share of $0.44, including $0.26 of amortization expense
  • Subsequent to quarter end, amended revolving credit facility to enhance operating and financial flexibility

FINANCIAL TABLE

Three Months Ended

Nine Months Ended

 

(in thousands, except per share data - unaudited)

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Revenue

$

196,225

$

232,209

$

613,531

$

668,436

Revenue % increase (decrease)

(15.5)

%

19.3

%

(8.2)

%

15.2

%

Gross margin

33.4

%

36.6

%

34.8

%

37.5

%

Operating margin

6.4

%

9.9

%

5.8

%

9.7

%

Earnings before taxes

$

3,351

$

16,190

$

8,737

$

44,463

Net income

4,389

13,585

8,624

38,246

Diluted earnings per share

0.23

0.70

0.45

1.97

Adjusted diluted earnings per share1

0.44

0.71

1.08

2.07

Adjusted EBITDA1

28,800

35,357

89,954

103,013

Cash and cash equivalents, end of period

65,073

75,735

Backlog, end of period

451,435

443,271

Total debt, end of period

595,096

462,516

1

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

 

EXECUTIVE COMMENTARY - RANDY J. MARTINEZ, INTERIM PRESIDENT AND CHIEF EXECUTIVE OFFICER

"During my first two months as MTS' Interim President and Chief Executive Officer, I have seen firsthand the critical role we play in building global infrastructure, supporting decarbonization efforts, and driving success for our customers. I am inspired by how our employees have continued this vital work during the last quarter despite the global pandemic.

Throughout the third quarter, we acted decisively to mitigate COVID-19's impact on our business. We strengthened our financial position through restructuring and cost reduction initiatives, temporary curtailments in cash compensation for our Board of Directors and senior executives, and the suspension of dividend payments. More recently, we amended our revolving credit facility to maximize our liquidity position under our current capital structure. Importantly, we executed these initiatives while maintaining a safe work environment for our employees and business continuity for our customers.

We experienced softer demand as the pandemic forced many customers to temporarily shut down their operations and delay orders. This was partially offset by top-line contributions from our recent acquisition of the R&D entities in Denmark, which have shown strong momentum since the transaction was completed early in the second quarter of fiscal year 2020.

As we look to the fourth quarter, we expect to sustain our performance sequentially while recognizing improvements in our order profile. Despite continuing challenges posed by the pandemic, we remain confident that our differentiated technology, industry-leading engineering, deep customer relationships, global footprint and strong talent pool will drive future growth.

Our top priority remains protecting the well-being of our employees while providing a high-quality service to our valued customers. I am committed to executing on our strategic initiatives and returning MTS to strong profitability."

HIGHLIGHTS FOR THE 2020 THIRD FISCAL QUARTER

Revenue

Revenue was $196.2 million, down 15.5% compared to the same prior year period, due to declines in Test & Simulation and Sensors. Both businesses were negatively impacted by COVID-19 due to the closure of customer sites, travel restrictions and delayed customer spending. Test & Simulation revenue decreased primarily due to a decline in volume from softness in our ground vehicles and materials sectors, coupled with lower service volume. The decline was partially offset by top-line contributions from the acquisition of the R&D entities in Denmark (R&D) of $14.1 million, which was completed early in the second quarter of fiscal year 2020. Sensors revenue declined due to softness in all sectors except our test sector, which included the addition of Endevco, which closed during the fourth quarter of fiscal year 2019, and continued U.S. Department of Defense volume growth. Importantly, we had no material cancellations of orders or backlog in the third quarter.

Orders

Test & Simulation orders for the quarter were $80.9 million, down 22.1% compared to the same prior year period primarily driven by lower orders in our ground vehicles sector and lower services orders reflecting the global impact of COVID-19. The decrease was partly offset by the addition of wind energy orders from the acquisition of R&D.

Sensors orders for the quarter were $70.3 million, down 8.5% compared to the same prior year period primarily driven by lower orders in our position, industrial and systems sectors reflecting the global impact of COVID-19. The decrease was partially offset by growth in our test sector primarily driven by additional funding associated with the U.S. Department of Defense and the addition of orders from the acquisition of Endevco.

Backlog

Backlog remained strong at $451.4 million, which reflects an increase of 1.8% compared to the same prior year period. Sequentially, from the second quarter of fiscal year 2020, backlog was down 9.7% driven by revenue realized during the third quarter outpacing order bookings. Ending backlog for Test & Simulation and Sensors was $373.3 million and $78.1 million, respectively.

Net Income and Diluted Earnings Per Share

GAAP diluted earnings per share was $0.23 compared to $0.70 in the same prior year period on net income of $4.4 million and $13.6 million, respectively. The $0.47 decrease was primarily driven by a decline in gross profit as the result of lower revenue volume in both businesses reflecting the impact of COVID-19. Additionally, we had higher Test & Simulation restructuring costs from actions taken in the second and third quarters of fiscal year 2020 to manage and reduce operating costs, higher interest expense on increased debt levels, the R&D contingent consideration fair value adjustment and higher acquisition-related costs due to the R&D and Endevco acquisitions. The decline was partially offset by lower compensation expense in both businesses, cost containment measures and a reduction in the effective tax rate which includes $0.08 of discrete tax benefits in the third quarter of fiscal year 2020.

Third quarter of fiscal year 2020 and 2019 results include $0.21 and $0.01, respectively, of non-recurring costs associated with restructuring actions taken in fiscal year 2020, the R&D contingent consideration fair value adjustment, acquisition-related expenses, and E2M and Endevco acquisition inventory fair value adjustments. R&D was acquired early in the second quarter of fiscal year 2020, and E2M and Endevco were acquired in the first and fourth quarters of fiscal year 2019, respectively. Adjusting for these items, adjusted diluted earnings per share was $0.44 for the third quarter of fiscal 2020, and $0.71 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 diluted earnings per share include the amortization of purchased intangible assets of $0.26 and $0.18 for the third quarter of fiscal year 2020 and 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 third quarter of fiscal year 2020 and 2019, respectively, in relation to companies that we have acquired.

Adjusted EBITDA

Adjusted EBITDA declined to $28.8 million in the third quarter of fiscal year 2020, down 18.5% compared to the same prior year period. The decrease was primarily driven by a decline in gross profit from lower revenue in both businesses reflecting the impact of COVID-19, partially offset by lower compensation expense 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 Update

The COVID-19 pandemic continues to create significant volatility, uncertainty and economic disruption resulting in an adverse impact on all facets of our business. We have taken swift action to mitigate impact and solidify our financial position. We are currently operating in all markets we serve as permitted, and our production capacity continues to recover as jurisdictions ease work restrictions throughout the world. However, restrictions on our employees' ability to access our customers, temporary closures of customer facilities and delays in customer spending have negatively impacted our sales and operating results for the third quarter of fiscal year 2020. Given the evolving nature of the pandemic, at this time, we cannot forecast with reasonable accuracy the pace of recovery across our end markets during the fourth quarter.

Cost Reductions and Restructuring Actions

As mentioned in our second quarter earnings release, we have taken swift cost reduction actions to provide an increased level of flexibility during these challenging times. We previously stated that we expect to realize at a minimum $10.0 million in cost savings from these actions in the second half of fiscal year 2020 and we have met or slightly exceeded the savings target for the third quarter of fiscal year 2020. We expect to see at least the same amount for the fourth quarter of fiscal year 2020 allowing us to achieve or slightly exceed our overall target of $10.0 million in cost savings.

Balance Sheet and Liquidity

During the quarter, our total debt balance decreased $5.5 million to $595.1 million as we continue to pay-down our outstanding debt balance. We ended the quarter with $65.1 million of cash on the balance sheet, leading to a net debt balance of $530.0 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. On July 30, 2020, subsequent to quarter end, we amended our revolving credit facility to provide operational and financial flexibility as we navigate COVID-19 and continued macroeconomic uncertainty.

"Our recently amended credit facility has allowed us to nearly double our total liquidity position to approximately $180 million before considering any letters of credit," said Brian Ross, Executive Vice President and Chief Financial Officer. "Our financial position is sound, further supported by free cash flow generation during the third quarter. We remain focused on our financial priorities, including maximizing liquidity and effectively managing our cost infrastructure, and we will continue to engage our lenders to support our financial flexibility to navigate the near-term environment and position us to return to growth as the market recovery takes hold."

THIRD QUARTER CONFERENCE CALL

As announced on July 20, 2020, a conference call will be held on August 4, 2020 (tomorrow), at 11:00 a.m. ET (10:00 a.m. CT). Randy J. Martinez, Interim 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 +1-800-353-6461 (international toll +1-334-323-0501) and reference the conference pass code 8588209. The conference call replay will be available at 1:00 p.m. ET following the call until 1:00 p.m. ET, August 11, 2020. Call toll free +1-888-203-1112 and reference the conference pass code 8588209.

A transcript of the call can also be accessed from the MTS website at http://investor.mts.com/events-and-presentations/presentations beginning on August 5, 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. Words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions identify forward-looking statements in 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

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Revenue

Product

$

175,223

$

205,528

$

537,304

$

587,297

Service

21,002

26,681

76,227

81,139

Total revenue

196,225

232,209

613,531

668,436

Cost of sales

Product

116,491

130,514

349,336

368,260

Service

14,239

16,592

50,850

49,418

Total cost of sales

130,730

147,106

400,186

417,678

Gross profit

65,495

85,103

213,345

250,758

 Gross margin

33.4

%

36.6

%

34.8

%

37.5

%

Operating expenses

Selling and marketing

26,857

33,321

89,707

98,805

General and administrative

19,692

20,621

67,382

63,804

 Research and development

6,303

8,160

20,485

23,008

 Total operating expenses

52,852

62,102

177,574

185,617

Income from operations

12,643

23,001

35,771

65,141

 Operating margin

6.4

%

9.9

%

5.8

%

9.7

%

Interest income (expense), net

(8,846)

(6,687)

(25,975)

(20,873)

Other income (expense), net

(446)

(124)

(1,059)

195

Income before income taxes

3,351

16,190

8,737

44,463

Income tax provision (benefit)

(1,038)

2,605

113

6,217

Net income

$

4,389

$

13,585

$

8,624

$

38,246

Earnings per share

 Basic

 Earnings per share

$

0.23

$

0.70

$

0.45

$

1.99

 Weighted average common shares outstanding

19,229

19,297

19,189

19,255

 Diluted

 Earnings per share

$

0.23

$

0.70

$

0.45

$

1.97

 Weighted average common shares outstanding

19,315

19,520

19,349

19,436

Dividends declared per share

$

$

0.30

$

0.60

$

0.90

 

 

 MTS SYSTEMS CORPORATION

 Condensed Consolidated Balance Sheets

 (unaudited - in thousands)

June 27, 2020

September 28, 2019

 ASSETS

 Current assets

Cash and cash equivalents

$

65,073

$

57,937

 Accounts receivable, net

118,686

121,260

Unbilled accounts receivable, net

91,787

80,331

Inventories, net

177,210

167,199

Prepaid expenses and other current assets

30,363

23,761

 Total current assets

483,119

450,488

 Property and equipment, net

100,160

101,083

 Goodwill

465,978

429,039

 Intangible assets, net

342,901

306,585

 Other long-term assets

30,962

10,782

 Total assets

$

1,423,120

$

1,297,977

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities

 Short-term borrowings

$

27,000

$

 Current maturities of long-term debt, net

2,830

27,969

 Accounts payable

51,639

46,849

 Advance payments from customers

64,980

70,520

 Other accrued liabilities

95,935

106,238

 Total current liabilities

242,384

251,576

 Long-term debt, less current maturities, net

565,266

484,648

 Other long-term liabilities

126,614

77,694

 Total liabilities

934,264

813,918

 Shareholders' equity

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

19,220 and 19,124 shares issued and outstanding as

of June 27, 2020 and September 28, 2019, respectively

4,805

4,781

 Additional paid-in capital

187,128

182,422

 Retained earnings

312,444

315,329

 Accumulated other comprehensive income (loss)

(15,521)

(18,473)

 Total shareholders' equity

488,856

484,059

 Total liabilities and shareholders' equity

$

1,423,120

$

1,297,977

 

 

 MTS SYSTEMS CORPORATION

Condensed Consolidated Statements of Cash Flows

 (unaudited - in thousands)

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Cash Flows from Operating Activities

Net income

$

4,389

$

13,585

$

8,624

$

38,246

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

Stock-based compensation

119

2,609

5,214

7,298

Fair value adjustment to acquired inventory

157

1,140

1,141

Depreciation

5,218

5,236

17,287

15,485

Amortization

6,288

4,449

17,343

12,668

Accretion of contingent consideration

439

895

Contingent consideration fair value adjustment

1,301

1,301

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

1,277

42

2,327

552

Amortization of debt issuance costs

776

708

2,220

2,807

Deferred income taxes

825

(187)

1,718

(1,430)

Other

366

370

128

1,457

Changes in operating assets and liabilities

(4,999)

(7,668)

(44,777)

(28,254)

Net Cash Provided by (Used in) Operating Activities

15,999

19,301

13,420

49,970

Cash Flows from Investing Activities

Purchases of property and equipment

(4,863)

(8,028)

(21,144)

(17,377)

Proceeds from sale of property and equipment

10

Purchases of business, net of acquired cash

(1,164)

(1,700)

(49,268)

(83,526)

Other

87

87

(285)

Net Cash Provided by (Used in) Investing Activities

(5,940)

(9,728)

(70,325)

(101,178)

Cash Flows from Financing Activities

Proceeds from issuance of long-term debt

58,576

80,391

(Payments on) proceeds from financing arrangements, net

(6,615)

(2,438)

22,168

(9,221)

Cash dividends

(5,719)

(5,375)

(17,205)

(16,099)

Proceeds from exercise of stock options and employee stock purchase plan

(1)

996

630

1,697

Payments to purchase and retire common stock

(303)

(986)

(1,176)

(1,384)

Net Cash Provided by (Used in) Financing Activities

(12,638)

(7,803)

62,993

55,384

Effect of Exchange Rate Changes on Cash and Cash Equivalents

1,070

(157)

1,048

(245)

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

(1,509)

1,613

7,136

3,931

Cash and cash equivalents balance, beginning of period

66,582

74,122

57,937

71,804

Cash and cash equivalents balance, end of period

$

65,073

$

75,735

$

65,073

$

75,735

 

 

Exhibit A

MTS SYSTEMS CORPORATION

Segment Financial Information

(unaudited - in thousands)

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Test & Simulation Segment

Revenue

$

116,404

$

148,328

$

362,631

$

424,920

Cost of sales

87,629

104,053

263,777

293,810

Gross profit

28,775

44,275

98,854

131,110

Gross margin

24.7

%

29.8

%

27.3

%

30.9

%

Operating expenses

29,067

32,851

92,955

99,671

Income (loss) from operations

$

(292)

$

11,424

$

5,899

$

31,439

Sensors Segment

Revenue

$

80,222

$

84,231

$

251,955

$

244,556

Cost of sales

43,502

43,424

137,463

124,916

Gross profit

36,720

40,807

114,492

119,640

Gross margin

45.8

%

48.4

%

45.4

%

48.9

%

Operating expenses

23,785

29,251

84,619

85,946

Income from operations

$

12,935

$

11,556

$

29,873

$

33,694

Intersegment Eliminations

Revenue

$

(401)

$

(350)

$

(1,055)

$

(1,040)

Cost of sales

(401)

(371)

(1,054)

(1,048)

Gross profit

21

(1)

8

Income (loss) from operations

$

$

21

$

(1)

$

8

Total Company

Revenue

$

196,225

$

232,209

$

613,531

$

668,436

Cost of sales

130,730

147,106

400,186

417,678

Gross profit

65,495

85,103

213,345

250,758

Gross margin

33.4

%

36.6

%

34.8

%

37.5

%

Operating expenses

52,852

62,102

177,574

185,617

Income from operations

$

12,643

$

23,001

$

35,771

$

65,141

 

Exhibit B

MTS SYSTEMS CORPORATION

Reconciliation of Adjusted Diluted Earnings Per Share

(unaudited - in thousands, except per share data)

Three Months Ended

June 27, 2020

June 29, 2019

Pre-Tax

Tax

Net

Pre-Tax

Tax

Net

Net income

$

3,351

$

(1,038)

$

4,389

$

16,190

$

2,605

$

13,585

Restructuring expenses 1

2,745

615

2,130

Acquisition-related expenses 1

1,243

268

975

98

21

77

Acquisition inventory fair value adjustment 1

157

24

133

Contingent consideration fair value adjustment 1

1,301

286

1,015

Adjusted net income 2

$

8,640

$

131

$

8,509

$

16,445

$

2,650

$

13,795

Weighted average diluted common shares outstanding

19,315

19,520

Diluted earnings per share

$

0.17

$

(0.06)

$

0.23

$

0.84

$

0.14

$

0.70

Impact of restructuring expenses

0.14

0.03

0.11

Impact of acquisition-related expenses

0.07

0.02

0.05

Impact of acquisition inventory fair value adjustment

0.01

0.01

Impact of contingent consideration fair value adjustment

0.07

0.02

0.05

Adjusted diluted earnings per share2

$

0.45

$

0.01

$

0.44

$

0.85

$

0.14

$

0.71

1   In determining the tax impact of restructuring expenses, acquisition-related expenses, acquisition inventory fair value adjustment and contingent consideration 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 Adjusted Diluted Earnings Per Share

(unaudited - in thousands, except per share data)

Nine Months Ended

June 27, 2020

June 29, 2019

Pre-Tax

Tax

Net

Pre-Tax

Tax

Net

Net income

$

8,737

$

113

$

8,624

$

44,463

$

6,217

$

38,246

Restructuring expenses 1

8,883

2,403

6,480

130

33

97

Acquisition-related expenses 1

4,867

1,043

3,824

1,133

238

895

Acquisition inventory fair value adjustment 1

1,140

239

901

1,141

172

969

Contingent consideration fair value adjustment 1

1,301

286

1,015

Adjusted net income 2

$

24,928

$

4,084

$

20,844

$

46,867

$

6,660

$

40,207

Weighted average diluted common shares outstanding

19,349

19,436

Diluted earnings per share

$

0.45

$

$

0.45

$

2.29

$

0.32

$

1.97

Impact of restructuring expenses

0.46

0.13

0.33

Impact of acquisition-related expenses

0.25

0.05

0.20

0.06

0.01

0.05

Impact of acquisition inventory fair value adjustment

0.06

0.01

0.05

0.06

0.01

0.05

Impact of contingent consideration fair value adjustment

0.07

0.02

0.05

Adjusted diluted earnings per share2

$

1.29

$

0.21

$

1.08

$

2.41

$

0.34

$

2.07

1   In determining the tax impact of restructuring expenses, acquisition-related expenses, acquisition inventory fair value adjustment and contingent consideration 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

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Net income

$

4,389

$

13,585

$

8,624

$

38,246

Net income margin

2.2

%

5.9

%

1.4

%

5.7

%

Income tax provision

(1,038)

2,605

113

6,217

Interest expense, net

8,846

6,687

25,975

20,873

Depreciation

5,218

5,236

17,287

15,485

Amortization

6,288

4,449

17,343

12,668

EBITDA 1

23,703

32,562

69,342

93,489

Stock-based compensation

119

2,609

5,214

7,298

Restructuring expenses 2

2,932

9,070

130

Acquisition-related expenses 2

745

29

3,887

955

Acquisition inventory fair value adjustment

157

1,140

1,141

Contingent consideration fair value adjustment

1,301

1,301

Adjusted EBITDA 1

$

28,800

$

35,357

$

89,954

$

103,013

Adjusted EBITDA margin 1,3

14.7

%

15.2

%

14.7

%

15.4

%

1   Denotes non-GAAP financial measure.

2   Restructuring and 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

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Net Cash Provided by (Used in) Operating Activities

$

15,999

$

19,301

$

13,420

$

49,970

Purchases of property and equipment

(4,863)

(8,028)

(21,144)

(17,377)

Proceeds from sale of property and equipment

10

Free cash flow1

$

11,136

$

11,273

$

(7,724)

$

32,603

1    Denotes non-GAAP financial measure.

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/mts-reports-fiscal-2020-third-quarter-financial-results-301104828.html

SOURCE MTS Systems Corporation



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