UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1994
Commission File Number 0-2382
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MTS SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-0908057
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Telephone number of registrant including area code (612) 937-4000
14000 Technology Drive, Eden Prairie, Minnesota 55344
- --------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK (PAR VALUE OF 25 CENTS PER SHARE
National Association of Securities Dealers Automated
Quotation National Market System
(Exchange on which registered)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes _X_ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 3, 1994, 4,540,997 shares of the Registrant's Common Stock were
outstanding and the aggregate market value of such Common Stock (based upon the
average of the high and low prices) held by non-affliates was $87,984,162.
------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for fiscal Year ended September 30, 1994 - Parts
I, II and IV.
Proxy Statement for Annual Meeting of Shareholders, statement dated prior to
January 31, 1995 - Part III.
MTS SYSTEMS CORPORATION
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
PART I
ITEM 1. BUSINESS
MTS Systems Corporation (hereafter called "MTS" or "the Company" or "the
Registrant") designs, manufactures, markets and services computer-based testing
and simulation systems for determining the mechanical behavior of materials,
products and structures; and measurement and control products for measuring
process variables and automating manufacturing processes. These systems and
products are used by MTS' customers to improve product quality, accelerate
product development and increase machine and worker productivity.
The Company's markets are varied, however, its systems and products share common
technologies: sensors for measuring machine and process parameters, control
technologies for test and process automation, hydraulic and electric servodrives
for precise actuation, and application software to tailor the test or automation
system to the user's needs.
PRODUCTS AND ORGANIZATION BY MARKET
The Company's operations are organized into three business sectors: 1)
Mechanical Testing and Simulation, 2) Measurement and Automation Instrumentation
and 3) Advanced Systems. The operational alignment of the sectors allows the
Company to maintain a strategic focus on markets with different applications of
the Company's technologies and with different competitors.
Mechanical Testing and Simulation: Customers in this sector use MTS systems for
research and development and for quality control of materials, products and
structures. MTS products and systems in this sector include:
* Material testing systems and software. These systems are used to determine
the fundamental mechanical properties of materials and to analyze how a
material will perform in a given application. For instance, the
substitution of ceramic materials for traditional metals in certain
applications requires understanding of how the ceramic material will behave
under the mechanical, thermal, and corrosive stress it will endure over the
product's service life.
MTS material testing systems use either servohydraulic or electromechanical
technology to apply loads to the specimen. Servohydraulic systems use
hydraulic (fluid) power to obtain the forces required. Electromechanical
systems use electric motors and mechanical transmissions. Generally,
servohydraulic systems operate at faster speeds and can apply loads in
multiple directions; electromechanical systems can be more precisely
controlled at slow speeds and can operate accurately over longer
displacements. In either type of system, sensors measure load, position,
strain and acceleration for controlling test variables.
In many cases, the control system includes a computer. Changes in specimen
properties are measured electronically and data is processed and analyzed
by the computer using proprietary MTS software.
Testing hardware and analysis software are specific to the type of material
being tested and its application. This has led the Company to develop a
broad array of test accessories. These include special chambers for
simulating high and low temperatures, pressures and corrosive environments;
sensors for measuring changes in specimen parameters within these
environments; and grips and fixtures for gripping or holding a variety of
specimen shapes, sizes and textures. Materials commonly tested include
elastomers, metals, ceramics, composites, plastics, fabrics, biomechanical
materials, and geomechanical materials.
* Performance and durability simulation systems. These systems are used in
research and development laboratories to determine the performance and
durability of products and structures.
Performance test systems permit customers to determine the dynamic
performance characteristics of a product or structure. For example, in the
auto-truck industry, customers use MTS performance systems to measure the
characteristics of tires, shock absorbers and suspension bushings and to
determine the handling response of a complete vehicle.
Durability simulators allow customers to study how prototypes of new
vehicles or structures will endure under actual service conditions. Again,
in the auto-truck industry, MTS road simulators are used to subject a
vehicle, or its component subassemblies, to the forces it is expected to
encounter over its service life and to find failures before the vehicle
goes into production. MTS believes customers can reduce the development
time and cost for new cars, trucks or off-road vehicles by testing them on
these simulation systems in the laboratory under controlled and repeatable
conditions.
Ground vehicle customers may also purchase MTS systems to detect squeaks
and rattles in new vehicles as they come off the production line. The
Company believes these systems are effective in reducing early warranty
costs.
MTS aerospace customers purchase component and full-scale simulators and
analysis systems to determine the service life of aircraft and aerospace
structures and components. Once in production, the most critical parts of
an aircraft may be continuously tested to keep its simulated hours of
flight well ahead of the actual flight hours of the earliest production
aircraft in the fleet.
MTS simulation systems and controls are also used to test civil engineering
structures. Actual structures, or scale-models, are subjected by these
systems to the static and dynamic loads they may incur in service. In
addition, MTS supplies systems for determining the characteristics of rocks
and soils--useful information for petroleum and mineral exploration.
The Company also supplies a limited range of modeling and analysis software
which permits customers to shorten the design process by simulating
"damaging" events in an analytical computer model. This can eliminate
several prototype fabrication and testing iterations, shortening the design
cycle further. Although it may eliminate some prototype iterations, this
does not usually eliminate the need to test a final prototype before
releasing the design for manufacture.
Mechanical Testing and Simulation accounted for 73% of sales in 1994, and 79% of
sales in 1993 and 1992. It represents the oldest and principal market for the
Company's technology. This sector has been principally responsible for the
Company's general corporate image: "a leading supplier of test equipment to
laboratories."
Measurement and Automation Instrumentation: Measurement and automation
instrumentation customers use MTS products in discrete part and fluid process
manufacturing. Products and systems in this sector include:
* Position and liquid-level sensors. Two types of sensors are produced. The
Temposonics(tm) displacement sensor is made in lengths from 3 inches to 50
feet for use in many processes in discrete manufacturing. Major
applications include injection molding and die casting machines, printing
and packaging machines, presses of all types and lumber mills.
This same technology is incorporated into another sensor used for
measurement of liquid levels and interfaces. These sensors are sold in
three application markets: the underground storage tank market (UST), the
process storage tank market (PST) and the large, above-ground storage tank
market (AST).
The UST market consists primarily of retail gas stations. It is served by
original equipment manufacturers (OEMs) who purchase MTS sensing probes and
incorporate them with an electronic unit to monitor fuel inventory and
detect leaks.
The PST and AST markets are served by an MTS sales force working through
numerous sales representative firms. The PST market, which requires sensors
generally less than 25 feet in length, uses the MTS Level Plus(R) product
line in a wide variety of applications in the chemical, petroleum refining,
pharmaceutical, and food industries. The AST market, which needs sensors up
to 60 feet in length, is the newest application for these sensors. MTS also
sells software packages to this market for monitoring multiple tank levels
on large tank "farms."
* Servo motors and controllers. Custom Servo Motors, Inc., an MTS subsidiary,
supplies MaxPlus(tm) high-performance, brushless servo motors to OEMs for
use in automating discrete-part manufacturing, converting and packaging
machines. The subsidiary also supplies Motion Plus(tm) control products
that provide control of complex, multi-axis, rotary and linear machine
motions. These motors and motion control products create systems that are
applied to a wide variety of automation tasks by both end-users and OEM
firms.
The MTS Measurement and Automation Instrumentation sector accounted for 18% of
sales in 1994, and 15% of sales in 1993 and 1992.
Advanced Systems: The Company's Advanced Systems Division develops new products
and capabilities in targeted technologies on cost-plus-fixed-fee and firm,
fixed-price contracts. Some of these contracts are within the field of
Mechanical Testing and Simulation and others are in Industrial Automation.
Examples in the field of Mechanical Testing and Simulation include simulation
systems to test gun recoil systems and breech assemblies. Examples in the field
of Industrial Automation include robotic systems for laser welding and
laser-based dimensional measuring.
The Advanced Systems sector accounted for 9% of sales in 1994 and 6% of sales in
1993 and 1992.
COMMON TECHNOLOGIES AND BUSINESS APPROACHES
MTS' systems are constructed using employees' systems engineering know-how and
with common system components generally composed of measuring and actuation
devices, electronic controls and application software. Many of these components
are proprietary and are developed and manufactured within the Company.
MTS employees engineer or configure the components into systems to match the
application called for in the customer's order. Frequently, special-purpose
software is developed to meet a customer's unique requirements. Such software
often represents a significant part of the value added by the Company.
Additional products such as personal and minicomputers, associated peripheral
equipment and large, machined parts are purchased from outside suppliers, as
required. Services offered to system customers include on-site installation,
training of customer personnel, technical manuals and continuing maintenance.
Such services are often included in the contract amount charged for completed
systems, but these services may be purchased separately, during and after the
system warranty period.
Certain proprietary products, such as sensors, process controls, motors,
actuators, and process software and firmware are sold as products to end users
and to other companies for incorporation into their systems, machines, or
processes. All products and most systems are sold on fixed-price contracts.
Complex systems and applied research are in some cases undertaken on
"cost-plus-fixed-fee" contracts.
Inasmuch as the Company's offerings are constructed from a family of common
products and technologies, and are integrated by a common knowledge base of
engineering, the Company considers itself to be in a single business. The
Company has reported the results of operations for its single business in the
Financial Statements (see Item 8).
1994 PRODUCT DEVELOPMENT HIGHLIGHTS
The Company funds new application and product development within its market
sectors. Highlights of product development undertaken or completed in 1994 are:
* The first Flat-Trac(tm) Roadway Simulator was completed by MTS during 1994.
This system is a laboratory roadway simulator for the auto industry. It can
simulate nearly all high speed test track conditions with the advantages of
environmental control, safety, repeatability, and observability.
* The Company introduced a triaxial elastomer test system for studying the
ability of elastomeric materials to dampen vibration.
* A new line of lower-priced axial/torsional test systems was added to the
Mini-Bionix(R) product line for the biomechanics and materials industry.
* The Company expanded the line of MaxPlus(tm) motors and drives with the
addition of an 8-inch servo motor. One version of the motor eliminates the
need for a separate mechanical gear box, resulting in a more reliable and
compact drive system with the ability to produce optimum torque and speed.
* The CVT 250 Coaxial Vision Torch system was introduced which uses a
through-the-torch viewing system to monitor weld parameters.
CHARACTERISTICS OF SALES
The Company's systems are sold and delivered throughout the world and its
customer orders cover a broad spectrum of industries, government agencies,
institutions, applications, and geographic locations. As such, MTS is not
heavily dependent upon any single customer for its business.
Mechanical Testing and Simulation systems range in price from less than $20,000
to as much as $10 million. Large, individual, fixed-price orders, although
important to the Company's image and technical advancement, tend to produce
volatility in both backlog and quarterly operating results. The majority of the
orders received in any one year are based on fixed-price quotations and require
significant technical communications with potential customers prior to receipt
of an order. The current typical delivery time for a system ranges from one to
twelve months, depending upon the complexity of the system and the availability
of components in the Company's or suppliers' inventories. Larger system
contracts can run as long as three years and cost-plus-fixed-fee contracts have
run longer.
Measurement and Automation products are sold in quantity at smaller per unit
prices in the $500 to $10,000 range. Delivery varies from several days to
several months.
Approximately 51% of sales in fiscal 1994, 49% in 1993, and 43% in 1992 were
made to domestic customers. The balance of sales, some of which are sold in
currencies other than the U.S. dollar, were to customers located outside the
United States--mainly in Europe, Asia Pacific, Latin America, and Canada. The
Company's foreign operations and foreign sales may be affected by local
political conditions, export licensing problems, and/or currency restrictions.
Sales Channels: MTS approaches its market sectors through a number of sales
channels. The Company's Mechanical Testing and Simulation equipment is sold
through an employee sales network, independent sales representatives, and a
direct mail (catalog) operation. Sales personnel are generally graduate
engineers or highly skilled technicians and are specially trained to sell MTS
products and services. Employee salespersons are compensated with salary and
sales incentives, and independent representatives are paid commissions only.
A list of domestic and international offices for the Company's Mechanical
Testing and Simulation business follows:
Domestic offices:
Akron Dayton Philadelphia
Austin Denver Raleigh
Baltimore Detroit Pittsburgh
Boston Huntsville San Diego
Chicago Los Angeles San Jose
Dallas Minneapolis Seattle
Washington, D.C.
International Offices:
Beijing and other cities, Paris, France
Peoples Republic of China Sao Paulo, Brazil
Berlin and other cities, Seoul, Korea
Germany Singapore
Gothenburg, Sweden Stroud, United Kingdom
Hong Kong Tokyo, Japan
Nagoya, Japan Torino, Italy
In addition, MTS works with sales and service representative organizations in
all industrialized countries of the world and in the developing countries of
Latin America and Asia.
The Company offers a comprehensive mail-order catalog of MTS components,
accessories, and products. The catalog includes products of complementary
vendors and aims to reach a broad range of customers involved in Mechanical
Testing and Simulation.
The Measurement and Automation sector sells its products through a separate
sales organization. A network of employee, direct sales, and external domestic
distributors, representatives, and system houses market the products of these
divisions. International sales currently account for 28% of this sector's
volume. Efforts to expand sales channels in international markets continue.
The Advanced Systems sector sells its systems through the sales organizations of
the other sectors, through other agents or directly.
International Operations and Export Sales: The sections entitled Geographic
Analysis of New Orders and Geographic Segment Information on pages 12 and 22 of
the Company's 1994 Annual Report to Shareholders, which sections are
incorporated by reference herein, contain information regarding the Company's
operations by geographic area.
Export Licensing: The Company's foreign shipments in fiscal 1994, 1993 and 1992
included sales to Asia Pacific, European, and other regions that require the
Company to obtain export licenses from the U.S. Department of Commerce, the
granting of which are subject to governmental approval. The Company does not
undertake manufacturing on custom systems or projects until it is assured that a
license will be granted, however, due to the extended time to process and
receive a license, design work is performed on some systems during the licensing
period. Changes in political relations between the U.S. and countries requiring
import licenses, as well as other factors, can adversely affect the Company's
ability to complete a sale should a previously issued license be withdrawn.
While political reform occurring internationally may relax export controls, U.S.
government initiatives on weapons proliferation and foreign policy in other
parts of the world may cause delays for certain shipments, or the rejection of
orders by the Company.
BACKLOG
The Company's backlog, which it defines as firm orders remaining unfilled,
totaled $84,591,000 at September 30, 1994; $88,731,000 at September 30, 1993;
and $99,221,000 at September 30, 1992. Approximately 5% of the backlog at
September 30, 1994 will be delivered after September 30, 1995. Delivery delays
may also occur due to technical difficulties and/or delayed export licensing
approval.
COMPETITION
In the Mechanical Testing and Simulation sector, customers may choose to buy
equipment from the Company or from several major competitors: Instron (U.S.
Based), Carl Schenck (Germany), Zwick (Germany) and Shimadzu (Japan). There are
also smaller competitors in most countries and applications.
In lieu of buying equipment from the Company or its competitors, customers may
contract with testing laboratories such as EG&G, Peabody, Wyle, or with
universities. Government laboratories also market testing services to the
public.
Finally, customers may choose to construct their own testing equipment from
commercially available components. Customers in the aerospace and automotive
industries and universities sometimes choose this approach, purchasing equipment
from companies such as Parker Hannifin, Moog, and Mannesman (Germany).
In the Measurement and Automation sector, the Company competes directly with
small to medium-sized specialty suppliers and also with divisions of the large
control system companies such as Rockwell, Emerson Electric, Siemens (Germany)
and Fanuc (Japan).
MANUFACTURING AND ENGINEERING
The Company conducted a significant portion of its fiscal 1994 Mechanical
Testing and Simulation and Advanced Systems manufacturing and engineering
activities in Minneapolis. Certain product assembly, final system assembly, and
application software development may be done in Berlin, Germany. The Tokyo,
Japan, facility procures some materials, assembles, and installs systems for
customers in that market. Electromechanical systems are assembled in Raleigh,
NC, facility and in the Paris, France (Adamel Lhomargy) facility. Manufacturing
and engineering activities for the Automation and Measurement Instrumentation
sector occur in Raleigh, NC, in Ludenscheid, Germany, and in New Ulm, MN.
Worldwide expenditures for manufacturing equipment were approximately $5,427,000
in 1994, $2,723,000 in 1993, and $5,920,000 in 1992.
PATENTS AND TRADEMARKS
The Company holds a number of patents, patent applications, licenses,
trademarks, and copyrights which it considers, in the aggregate, to constitute a
valuable asset. The Company's system business is not dependent upon any single
patent, license, trademark, or copyright. Furthermore, with only a few
exceptions, there is no overall patent protection available to the Company.
RESEARCH AND DEVELOPMENT
The Company does not do basic research, but does fund significant product,
system and application developments. Costs of these development programs are
expensed as incurred, and amounted to $12,645,000, $13,697,000, and $9,999,000
for fiscal years 1994, 1993, and 1992, respectively. Additionally, the Company
also undertakes "first of their kind" high-technology, customer-funded contracts
which contain considerable technical pioneering. Innovation on customer jobs was
continued in fiscal 1994 at levels consistent with prior years. The combination
of internally sponsored product development and system or application innovation
on customer contracts approximates 10% of annual sales volume.
EXECUTIVE OFFICERS OF THE COMPANY
The Corporate Executive Officers of the Registrant on September 30, 1994 were:
<TABLE>
<CAPTION>
Name and Age Position Officer Since
- ------------ -------- -------------
<S> <C> <C>
D. M. Sullivan (59) Chairman, President and 1976
Chief Executive Officer
W. G. Beduhn (53) Vice President 1983
M. L. Carpenter (57) Vice President 1973
and Chief Financial Officer
R. W. Clarke (64) Vice President 1973
K. E. Floren (58) Vice President 1990
W. Ongyert (56) Vice President 1985
J. H. Owens (54) Vice President 1984
M. G. Togneri (57) Vice President 1991
K. D. Zell (52) Executive Vice President 1979
</TABLE>
Officers serve at the discretion of the board, are elected annually by the
directors, and serve until their successors are elected.
EMPLOYEES
MTS employed 1,557 persons as of September 30, 1994, including 290 employees
located in Western Europe, 45 in Japan, 14 in China, 2 in Canada, 2 in
Singapore, 10 in Korea, 4 in Hong Kong, and 1 in South America. Approximately 30
of the 1,557 were scheduled for termination within the succeeding 90 days as
part of the Company's work-force reduction plan.
None of the Company's U.S. employees are covered by a collective bargaining
agreement, and MTS has experienced no work stoppages at any location.
SOURCES AND AVAILABILITY OF RAW MATERIALS AND COMPONENTS
A major portion of products and systems delivered to a customer may consist of
equipment purchased from vendors. The relationship which the Company promotes
with its vendors is one of close cooperation. The Company is dependent upon
certain computing hardware and software devices and certain raw materials which
have limited sources. However, the Company has not experienced significant
problems in procurement or delivery of any essential materials, parts, or
components in the last several years.
Due to the manner in which the Company sells the majority of its products, on a
fixed-price contract agreed upon at the time the order is obtained, wide
fluctuations up or down in cost of materials and components from order date to
delivery date, if not accurately forecast by the Company at the earlier date,
can change the profitability of any sale. The Company believes that such
fluctuations have not had a material effect on reported earnings, except as
affected by changes in foreign currency rates, which have been reported.
ENVIRONMENTAL MATTERS
Management believes the Company's operations are in compliance with Federal,
state, and local provisions relating to the protection of the environment.
ITEM 2. PROPERTIES
Domestic Facilities--
The Company's main plant and corporate headquarters, occupying 380,000
square feet, is located in Eden Prairie, Minnesota, a suburb of
Minneapolis. The original plant was completed in 1967 with additions in
1970, 1975, 1978, 1981, and 1990. Approximately 45% of the Minneapolis
facility is used for manufacturing while the balance of the facility is
used for office space. The plant site is situated on 54 acres of land
on Minnesota State Highway 5, approximately one mile west of Interstate
Highway 494.
Some of the Minneapolis additions were financed with debt obligations
and others were financed from operations. As of September 30, 1994 all
debt relating to this facility had been paid.
Custom Servo Motors, Inc. occupies a 14,000 square foot plant in New
Ulm, Minnesota (65 miles southwest of Minneapolis). The plant provides
light assembly operations and office space. The facility was
constructed in 1993 by the New Ulm Economic Development Corporation.
MTS has a five year operating lease for the facility with provisions to
extend the lease, purchase the property, or terminate the lease. The
terms of the lease agreement do not require capitalization of the asset
and the related obligation.
Sensors Division is located near the Research Triangle Park in Cary,
North Carolina, a suburb of Raleigh. A 40,000 square foot plant,
constructed in 1988, provides manufacturing and office space. In 1992,
25,000 square feet was added to the plant. Land acquisition and
construction costs for both projects totaled $4,300,000 and were
financed from current operations.
SINTECH Division is located adjacent to the Sensors Division site in
Cary, North Carolina. A 25,000 square foot plant, constructed in 1991,
provides manufacturing and office space. Land acquisition and
construction costs approximated $2,700,000 and were financed from
current operations.
International Facilities--
In fiscal 1994 MTS Systems GmbH (Berlin) sold the land and its former
facility (24,000 square feet) and purchased a larger building (80,000
square feet). MTS occupies approximately two thirds of this space.
Currently half of the occupied space is utilized for manufacturing and
the remainder for offices. The remaining third of the facility is
planned to be leased to outside parties. As of September 30, 1994,
3,000 square feet has been leased. The building is situated on land
leased by MTS from the city government. (The lease expires in 2069).
The acquisition cost of the existing facility was $12,000,000 and was
financed partially by proceeds of the former facility's sale,
assumption of the existing secured mortgage loans of $2,056,000 and
current operations.
Adamel Lhomargy S.A., operates a leased facility in Paris, France, of
approximately 38,000 square feet in size. Approximately 40% of this
space is used for manufacturing with the remainder used as offices. The
current lease expires at the end of the 1998 fiscal year.
MTS Sensors Technologie operates a leased facility in Ludenscheid,
Germany on approximately six acres of land. The manufacturing and
office facilities occupy 10,000 square feet at this location.
The Company also leases office and general purpose space for its sales
and service subsidiaries in Stroud, United Kingdom; Paris, France;
Torino, Italy; Seoul, South Korea; Tokyo and Nagoya, Japan; Toronto,
Canada; Sao Paulo, Brazil; Gothenburg, Sweden; Beijing and Shanghai,
Peoples Republic of China; Singapore; and Hong Kong. No manufacturing
is done at these locations.
Expansion Plans--
The Company owns approximately 100 acres of land adjacent to its
Minneapolis facility. This site could house expanded manufacturing
operations. Also, the site in Raleigh allows for expansion. The Company
will be expanding the capacity of the New Ulm and Ludenscheid
facilities in 1995 with the addition of 15,000 and 8,000 square feet,
respectively.
The Company considers its current facilities and planned expansion adequate to
support anticipated sales in 1995.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings were pending or threatened against the
Company or its subsidiaries as of September 30, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the year ended
September 30, 1994, for a vote by the shareholders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT's COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's stock is traded on the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market System under the
symbol MTSC. The following schedule shows the Company's low and high
closing sale transactions as reported by NASDAQ.
Quarter Ended Low * High*
December 31, 1992 $ 20.38 $ 26.00
March 31, 1993 $ 21.50 $ 27.00
June 30, 1993 $ 24.75 $ 29.00
September 30, 1993 $ 27.75 $ 32.50
December 31, 1993 $ 27.75 $ 32.00
March 31, 1994 $ 28.50 $ 32.50
June 30, 1994 $ 25.00 $ 29.50
September 30, 1994 $ 22.00 $ 28.50
*Source: NASDAQ/NMS Monthly Statistical Report
As of December 3, 1994 there were 1,394 holders of record of the
Company's $.25 par value common stock. The Company estimates another
1,300 shareholders, whose stock is held by nominees or broker dealers,
are included in the holders of record.
The Company has a history of paying quarterly dividends and expects to
continue such payments in the future. During 1994, 1993, and 1992, the
Company paid dividends totaling $.56, $.48, and $.48 per share, per
year, respectively, to holders of its common stock.
Under the terms of the Company's note and credit agreements, certain
covenants may restrict the payment of cash dividends. As of September
30, 1994, retained earnings available for distribution under such
agreements were $20,600,000.
ITEM 6. SELECTED FINANCIAL DATA
A comprehensive summary of selected financial information is presented
in the "Six Year Financial Summary." This data is on page 1 of the
Company's 1994 Annual Report to Shareholders. Data included in the
summary is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations on pages 12 through 16 of the Company's 1994 Annual
Report to Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Report of Independent Public
Accountants, Quarterly Financial Information (unaudited), and Six Year
Financial Summary (unaudited) included in the Company's 1994 Annual
Report to Shareholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a) Information concerning the Company's directors may be found in
the Company's Proxy Statement, a definitive copy of which will be
filed with the Securities and Exchange Commission prior to
January 31, 1995, and is incorporated herein by reference.
(b) See Item 1. Business, on page 9 for information on the Company's
Executive Officers.
(c) The Company has no other significant employees requiring
disclosure in this Form 10-K.
(d) There are no family relationships between and among directors or
officers.
(e) Business experience of Directors may be found in the Company's
Proxy Statement, a definitive copy of which will be filed with
the Securities and Exchange Commission prior to January 31, 1995,
and is incorporated herein by reference. Business experience of
the Executive Officers for at least the last 5 years (consisting
of positions with the Company unless otherwise indicated) is as
follows:
Officer Business Experience
D.M.Sullivan Chairman in 1994. Chief Executive Officer since 1987.
President and Chief Operating Officer since 1982. Vice
President from 1976 to 1982. Has extensive prior experience
in the management of technology intensive businesses.
W.G.Beduhn Vice President of Advanced Systems Division since 1991. Vice
President of Technology Development from 1983 to 1991.
Division manager of various marketing and operating
divisions from 1977 to 1983.
M.L.Carpenter Vice President and Chief Financial Officer since 1991. Vice
President and Treasurer since 1973.
R.W.Clarke Vice President of Simulation Group since 1984. Previous
responsibilities include Vice President of Sales and Service
and various market divisions from 1973 to 1984.
K.E.Floren Vice President of Aerospance and Engineering Mechanics
Division, North American Sales and Service since 1993. Vice
President of Vehicle Dynamics Division from 1990 to 1993.
Manager of various marketing and sales units from 1975 to
1990.
W.Ongyert Vice President of European Sales and Service since 1985.
General manager of European operations from 1977 to 1985.
J.H.Owens Vice President, Minneapolis Operations since 1988. Vice
President, Product Group from 1986 to 1988. Vice President
of Manufacturing Operations Division from 1984 to 1986.
Division manager of various product manufacturing units from
1976 to 1984.
M.G.Togneri Vice President of Measurement and Automation Group since
April 1991. Prior to his employment at MTS was V.P. at
Square D Corporation and General Manager of Crisp
Automation. Has extensive experience in the industrial
instrumentation and control business in the U.S. and
internationally.
K.D.Zell Executive Vice President of Mechanical Testing and
Simulation in 1993. Vice President of Materials Testing
Division from 1988 to 1993. Vice President, Sales and
Service from 1984 to 1988. Vice President, Product Group
from 1979 to 1984. Division manager, Hydro-mechanical
Products from 1978 to 1979.
(f) Information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated herein by
reference from the Company's Proxy Statement, a definitive copy
of which will be filed with the Securities and Exchange
Commission prior to January 31, 1995, pursuant to Regulation 14A
under the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
See Item 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Items 11 and 12 is incorporated
herein by reference from the Company's Proxy Statement, a
definitive copy of which will be filed with the Securities and
Exchange Commission prior to January 31, 1995, pursuant to
Regulation 14A under the Securities Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
The following documents are filed as part of this report:
(a) Financial Statements:
See accompanying Index to Financial Statements on Page F-1.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of
fiscal 1994.
(c) Exhibits:
3.a Restated Articles of Incorporation, adopted January 31,
1994, incorporated by reference from exhibit 3.a to
Form 10-Q for the quarter ended March 31, 1994.
3.b By-Laws, incorporated by reference to exhibit 3.b to
the Form 10-K for the fiscal year ended September 30,
1986.
10.a Management Variable Compensation Plan-Fiscal 1994,
dated November 18, 1993.
10.b 1985 Employee Stock Option Incentive Plan, incorporated
by reference to exhibit 4(a) from Form S-8, File
No. 2-99389.
10.c 1987 Stock Option Plan incorporated by reference to
exhibit A from Form S-8, File No. 33-21699.
10.d 1990 Stock Option Plan, incorporated by reference to
exhibit A from Form S-8, File No. 33-35288.
10.e 1994 Stock Plan incorporated by reference to
exhibit 4(a) from Form S-8, File No. 33-73880.
10.f Severance Agreement, dated May 1, 1990 between the
registrant and William G. Beduhn, incorporated by
reference to exhibit 10.g of Form 10-K for the fiscal
year ended September 30, 1990.
10.g Severance Agreement, dated May 1, 1990 between the
registrant and Marshall L. Carpenter, incorporated by
reference to exhibit 10.i of Form 10-K for the fiscal
year ended September 30, 1990.
10.h Severance Agreement, dated May 1, 1990 between the
registrant and Richard W. Clarke, incorporated by
reference to exhibit 10.j of Form 10-K for the fiscal
year ended September 30, 1990.
10.i Severance Agreement, dated December 3, 1990 between the
registrant and Kenneth E. Floren, incorporated by
reference to exhibit 10.k of Form 10-K for the fiscal
year ended September 30, 1990.
10.j Severance Agreement, dated May 1, 1990 between the
registrant and Werner Ongyert, incorporated by
reference to exhibit 10.m of Form 10-K for the fiscal
year ended September 30, 1990.
10.k Severance Agreement, dated May 1, 1990 between the
registrant and J. Howell Owens, incorporated by
reference to exhibit 10.n of Form 10-K for the fiscal
year ended September 30, 1990.
10.l Severance Agreement, dated May 1, 1990 between the
registrant and Donald M. Sullivan, incorporated by
reference to exhibit 10.p of Form 10-K for the fiscal
year ended September 30, 1990.
10.m Severance Agreement, dated May 1, 1990 between the
registrant and Richard S. White, incorporated by
reference to exhibit 10.q of Form 10-K for the fiscal
year ended September 30, 1990.
10.n Severance Agreement, dated May 1, 1990 between the
registrant and Keith D. Zell, incorporated by reference
to exhibit 10.r of Form 10-K for the fiscal year ended
September 30, 1990.
10.o Severance Agreement, dated April 1, 1991 between the
registrant and Mauro G. Togneri, incorporated by
reference to exhibit 10.s of Form 10-K for the fiscal
year ended September 30, 1991.
10.p 1992 Employee Stock Purchase Plan, incorporated by
reference to exhibit 4(a) from Form S-8, File
No. 33-45386.
13. Annual Report to Shareholders for the fiscal year ended
September 30, 1994.
21. Subsidiaries of the Company.
23. Consent of Independent Public Accountants.
27. Financial Data Schedule.
(d) Financial Statement Schedules:
See accompanying Index to Financial Statements on page F-1.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
MTS SYSTEMS CORPORATION
By: /s/ Donald M. Sullivan
Donald M. Sullivan
Chairman, Chief Executive Officer, President and Director
By: /s/ Marshall L. Carpenter
Marshall L. Carpenter
Vice President and Chief Financial Officer
By: /s/ John A. Lessner
John A. Lessner
Corporate Controller
Date: December 22, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
By: /s/ E. T. Binger
E. T. Binger, December 22, 1994
Director
By: /s/ Charles A. Brickman
Charles A. Brickman, December 22, 1994
Director
By: /s/ Thomas E. Holloran
Thomas E. Holloran, December 22, 1994
Director
By: /s/ Bobby I. Griffin
Bobby I. Griffin, December 22, 1994
Director
By: /s/ Thomas E. Stelson
Thomas E. Stelson, December 22, 1994
Director
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
A. STATEMENTS OF REGISTRANT
No separate financial statements of the Registrant are included herein
as the Registrant is primarily an operating company. All subsidiary
companies are totally-held, and their indebtedness to any person other
than the Registrant or its consolidated subsidiaries is, in the
aggregate, less than 5% of consolidated assets at September 30, 1994.
The financial statements of the Registrant and all subsidiaries are
included in the consolidated financial statements.
B. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the consolidated financial statements in the
Company's 1994 Annual Report to Shareholders which are incorporated by
reference in accordance with Rule 12b-23 under the Securities Exchange
Act of 1934 and attached hereto.
Annual
Report 10-K
Page Page
Quarterly Financial Information (Unaudited) 16 -
Consolidated Balance Sheets - September 30, 1994 17 -
and 1993
Consolidated Statements of Income and Shareholders'
Investment for the Years Ended September 30, 1994,
1993 and 1992 18 -
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1994, 1993, and 1992 19 -
Notes to Consolidated Financial Statements 20 -
Report of Independent Public Accountants 26 -
C. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULES - F-3
D. CONSOLIDATED SCHEDULES
Schedule Description
V Summary of Consolidated Property --- F-4
VI Summary of Consolidated Accumulated
Depreciation --- F-5
VIII Summary of Consolidated Allowances for
Doubtful Accounts --- F-6
X Summary of Consolidated Supplementary
Income Statement Information --- F-7
All schedules except those listed above have been omitted as not
required, not applicable, or the information required therein is
contained in the financial statements or the footnotes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To MTS Systems Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in MTS Systems Corporation's annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated November 29, 1994. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedules listed as a part of Item 14 (pages F-4 through F-7) in this Form 10-K
are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
November 29, 1994
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE V - SUMMARY OF CONSOLIDATED PROPERTY
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Construction Buildings and Machinery
Land in Process Improvements and Equipment Total
(expressed in thousands)
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1991 $ 3,534 $ -- $ 26,606 $ 36,733 $ 66,873
Additions 51 2,963 707 3,257 6,978
Retirements or sales -- -- (112) (741) (853)
Transfers -- (2,963) 198 2,765 --
Foreign currency translation adjustment 31 -- 288 639 958
Balance, September 30, 1992 3,616 -- 27,687 42,653 73,956
Additions 228 (42) 181 4,912 5,279
Retirement or sales (92) -- (6) (1,578) (1,676)
Transfers -- 42 (72) 30 --
Foreign currency translation adjustment (27) -- (258) (641) (926)
Balance, September 30, 1993 3,725 -- 27,532 45,376 76,633
Additions 152 312 10,837 6,559 17,860
Retirements or sales (182) -- (1,956) (1,777) (3,915)
Transfers -- (312) (43) 355 --
Foreign currency translation adjustment 8 -- 82 290 380
Balance, September 30, 1994 $ 3,703 $ -- $ 36,452 $ 50,803 $ 90,958
</TABLE>
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE VI - SUMMARY OF CONSOLIDATED ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
Buildings and Machinery
Improvements and Equipment Total
(expressed in thousands)
<S> <C> <C> <C>
Balance, September 30, 1991 $ 7,758 $ 23,120 $ 30,878
Provision for depreciation 881 4,355 5,236
Retirements or sales (56) (692) (748)
Foreign currency translation adjustment (104) 407 511
Balance, September 30, 1992 8,687 27,190 35,877
Provision for depreciation 917 4,484 5,401
Retirements or sales (6) (1,387) (1,393)
Foreign currency translation adjustment (96) (410) (506)
Balance, September 30, 1993 9,502 29,877 39,379
Provision for depreciation 918 4,945 5,863
Retirement or sales (875) (1,487) (2,362)
Foreign currency translation adjustment 192 518 710
Balance, September 30, 1994 $ 9,737 $ 33,853 $ 43,590
</TABLE>
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - SUMMARY OF CONSOLIDATED ALLOWANCES
FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
<TABLE>
<CAPTION>
Balance Provision Amounts Balance
Beginning Charged to Written End of
of Year Operations Off Year
(expressed in thousands)
<C> <C> <C> <C> <C>
1994 $ 1,461 $ 110 $ (132) $ 1,439
1993 608 981 (128) 1,461
1992 511 262 (165) 608
</TABLE>
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUMMARY OF CONSOLIDATED SUPPLEMENTARY
INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
1994 1993 1992
(expressed in thousands)
Advertising and promotion $2,848 $2,903 $2,754
Expenses incurred for taxes other than income and payroll, maintenance, repairs,
amortization of other assets, and royalties have been omitted as each was less
than 1% of net sales. Research and development costs are shown in the
accompanying Consolidated Statements of Income.
EXHIBIT INDEX
Exhibit
No. Description
10.a Management Variable Compensation Plan-Fiscal 1994
13. Annual Report to Shareholders for the fiscal year
ended September 30, 1994
21. Subsidiaries of the Company
23. Consent of Independent Public Accountants
27. Financial Data Schedule
EXHIBIT 10.A
REV H, 18 November 1993
(Approved by Board 30 November 1993)
MANAGEMENT VARIABLE COMPENSATION PLAN
FISCAL '94
(Underline indicates significant changes from '93 Plan)
1. PURPOSE OF PLAN
To focus efforts on achievement of objectives which are critical to the
success of the Company; to reward the accomplishment at a level above
competition when performance is above that of comparable companies; to
more closely couple total compensation costs (salary plus variable) to
the financial results of the enterprise.
2. RELATIONSHIP TO OTHER COMPENSATION PLANS
2.A SALARY PLAN
The Management Variable Compensation Plan covers objectives related to
the financial and TQM operating objectives of the Company. The midpoint
of a given Salary range will be suppressed by 1/5th of the average
competitive payout potential of participants in that range to conform
to the Company's fixed vs. variable compensation strategy (i.e., if the
participants in a range have an average competitive payout potential of
20%, the midpoint of the range will be suppressed 4%).
2.B RELATION TO U.S. EMPLOYEE PROFIT SHARING AND UNIT GAINSHARING PLAN
The calculations for the Variable Compensation Plan are made after
deductions for Profit Sharing and Gainsharing.
Effective with fiscal 1989, payout to a participant in the Management
Variable Compensation Plan is included in the calculation of the
Company's contribution to that employee's profit sharing.
3. ELIGIBILITY AND PARTICIPATION [entire section rephrased]
* Corporate officers
* Unit vice presidents
* Market and functional unit managers
* Managers, technical supervisors and key marketing or technical
employees who meet certain minimum responsibilities for
profitability, financial/human resource acquisition and
allocation, balance sheet control, and/or market/technical
direction - defined as beginning at SAM 15 and TE 5 or equivalent.
An employee must be in such a position by the November/December Board
of Directors meeting in order to be eligible for the fiscal year plan
beginning the preceding 1 October, unless otherwise authorized by the
president.
Certain subsidiaries may have their own management plans approved by
the cognizant corporate vice president and president.
An officer may recommend that an employee, who is otherwise eligible,
not participate but such a recommendation must be agreed to by the
president.
Participants are eligible for payout in proportion to the % of the
fiscal year the participant is responsible for the qualifying position,
unless otherwise authorized by the president.
Employees who work less than full time during a year (e.g., due to a
personal leave, but not due to illness) would earn a proportionately
reduced payout.
In no case will payout be made to employees who work less than 1,000
hours in the year.
The participant must be on MTS' payroll at the end of the fiscal year
for which the objective applies to qualify for a payout. Employees
resigning or terminated before the end, regardless of cause, are not
eligible unless otherwise authorized by the president. (An example of
an exception would be early retirement or voluntary separation under a
workforce reduction plan.)
No employment contract is implied by participation in this Plan.
4. ESTABLISHMENT OF OBJECTIVES
a. The Board of Directors [deleted: Human Resource Committee] sets
the Corporate EPS and/or Return on Average Net Asset (ROANA)
objectives and the corporate market share/order bookings
objective at their November/December meeting.
b. All other financial objectives are stated in measurable terms and
must be finalized by the November/December meeting unless
otherwise authorized by the president. They are not renegotiable.
All other objectives must be finalized by 30 December.
The cognizant officers and president approve the other objectives
for all participants. The purpose of this approval is to:
* Integrate objectives into Company TQM operating plan
* Guard against conflicting objectives
* Help to assure consistency in degree of difficulty
Revenue is not an allowable goal since it is (already) a
principal factor in EPS, ROANA, pretax, contribution, and gross
margin goals.
c. Each participant will have a mix of objectives per the attached
Schedule.
5. COMPETITIVE PAYOUT POTENTIAL
The competitive payout potential, expressed as a % of the midpoint of
the salary structure, or actual salary in the case of subsidiary
management, is shown below:
<TABLE>
<CAPTION>
POSITION COMPETITIVE PAYOUT POTENTIAL %
<S> <C> <C>
Chairman E5 60
President E5 60
Executive Vice President, MT&S E-4 50
Vice President E-3/3.5 25-45, depending on revenue level (profit potential)
Vice President E-2 25-45, depending on revenue level (profit potential)
Vice President (Unit) E-1 15-45, depending on revenue level (profit potential)
Market Division Management SAM17-21 15-35, depending on revenue level (profit potential)
All Other Management/
Leadership SAM18-21 10-35, depending on profit impact
SAM15-17 6-25, depending on profit impact
TE5/5S-9/9S 6-25, depending on profit impact
</TABLE>
6. CRITERIA FOR OBJECTIVES
A given objective is set at a number (e.g., $, %) which equals, or
represents acceptable progress toward, the 2-3 year financial goals of
the unit. The lower limit, where initial payout begins, is set at a
number which represents good accomplishment under the conditions
foreseen for the period covered by the objective. EPS, ROANA, and other
unit financial limits are normally set 1/3rd below the objective;
[deleted: the ROANA limit is normally 1/4 below the objective; ] the
order booking/market share lower limit span is normally set at the 2-3
year annual growth goal rate.
Linear interpolation is used between the lower limit and the objective.
7. EXTRA PAYOUTS
The objectives are set at challenging but realistic levels which are
used in the overall process of planning and resource allocation. This
is not meant to be a limit to our aspirations, and performance in
excess of those objectives should be rewarded as it is to the benefit
of all stakeholders in the enterprise.
Over-ranging of an objective can earn an additional equal payout if
that objective is exceeded by an amount up to the lower limit span.
Over-ranging is limited to objectives equaling 70% of the competitive
full payout per the attached Schedule.
Linear interpolation is used between the over-ranging amount and the
objectives.
8. PAYOUT
Within 90 days of the end of the fiscal year.
9. APPROVAL OF PLAN
The Plan, and participation therein, are subject to annual review and
approval by the Board of Directors.
Attachments: FY '94 MVC Plan Participation and Schedule of Objectives
Exhibit 13
SIX YEAR FINANCIAL SUMMARY
(September 30)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
(dollars expressed in thousands, except share data and pretax income per employee)
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net sales $ 200,550 $ 189,499 $161,013 $ 157,865 $ 160,159 $ 152,630
United States sales 101,747 92,153 68,931 72,538 75,901 75,806
International sales 98,803 97,346 92,082 85,327 84,258 76,824
Income before income taxes 12,629 14,937 6,452 14,350 11,328 15,578
Net income 8,659 10,382 4,915 10,080 8,408 11,064
Net income per share, fully diluted basis 1.85 2.27 1.07 2.25 1.82 2.41
Research and development costs 12,645 13,697 9,999 9,271 11,225 8,986
Net interest expense 1,860 1,207 704 1,061 824 1,294
Depreciation and amortization 6,214 5,648 5,789 5,755 5,617 4,392
Total payroll 61,619 57,784 55,961 49,596 51,777 48,012
FINANCIAL POSITION
Current assets $ 123,206 $ 123,445 $100,929 $ 91,240 $ 85,043 $ 92,239
Current liabilities 66,361 66,961 50,717 44,183 35,565 43,779
Current ratio 1.9:1 1.8:1 2.0:1 2.1:1 2.4:1 2.1:1
Net working capital 56,845 56,484 50,212 47,057 49,478 48,460
Inventories 35,152 25,009 23,591 22,819 24,656 26,867
Property and equipment, net 47,368 37,254 38,079 35,995 35,204 30,161
Total assets 175,708 165,716 144,650 135,627 126,631 125,822
Interest bearing debt 23,851 33,299 19,335 20,565 18,806 17,902
Shareholders' investment 100,046 93,011 84,992 80,739 74,358 69,265
Shareholders' investment per share 21.90 20.47 19.04 18.17 16.48 15.08
Free cash flow(1) 5,414 8,809 2,653 10,786 7,590 9,843
Free cash flow per share 1.16 1.93 .58 2.41 1.64 2.14
OTHER STATISTICS AND RATIOS
Fully diluted shares outstanding(2) 4,668 4,572 4,595 4,477 4,629 4,591
Number of shareholders(3) 1,394 1,400 1,413 1,838 1,850 1,879
Number of employees 1,557 1,447 1,404 1,372 1,410 1,384
Pretax income per employee $ 8,111 $ 10,323 $ 4,595 $ 10,459 $ 8,034 $ 11,256
Backlog of orders 84,591 88,731 99,221 82,404 71,032 72,977
New orders 195,260 178,786 178,178 169,237 157,212 146,620
Net income as a percent of net sales 4.3% 5.5% 3.1% 6.4% 5.2% 7.2%
Research and development costs
as a percent of net sales 6.3% 7.2% 6.2% 5.9% 7.0% 5.9%
Effective tax rate 31% 30% 24% 30% 26% 29%
Interest bearing debt to equity ratio 24% 36% 23% 25% 25% 26%
Return on average net assets(4) 10.2% 16.3% 7.6% 17.4% 14.6% 22.9%
Return on beginning
shareholders' investment per share 9.0% 11.9% 5.9% 13.7% 12.1% 18.1%
Cash dividends paid per share .56 .48 .48 .40 .40 .28
</TABLE>
(1) Net income plus depreciation and amortization minus property and equipment
expenditures (exclusive of land acquisition and plant construction) minus
cash dividends.
(2) Presented on a weighted average basis of common shares assuming conversion
of common stock equivalents during each year after retroactive adjustments
for issued shares, for stock splits and reduction of shares from treasury
stock purchases (in thousands of shares).
(3) On December 3, 1994, there were 1,394 common shareholders of record, with
another estimated 1,300 shareholders whose stock is held by nominees or
broker dealers.
(4) (Income before taxes plus interest expense) divided by (average quarterly
assets minus non-interest bearing liabilities).
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKLOG/NEW ORDERS
1994 1993 1992
(expressed in thousands)
New Orders:
North American* $ 101,498 $ 98,019 $ 87,923
International 93,762 80,767 90,255
Total $ 195,260 $ 178,786 $ 178,178
Backlog $ 84,591 $ 88,731 $ 99,221
*Includes U.S. and Canada
New orders in 1994 included 30 orders with unit values exceeding $500,000
compared to 38 orders in this category in 1993 and 38 orders in 1992. These
orders represented 26%, 32%, and 34% of the new order total for these three
years.
North American new orders increased 4% in 1994 and 11% in 1993 with our
Measurement and Automation Instrument sector particularly strong in both years.
International orders increased 16% in 1994, reversing the 11% decrease
experienced in 1993. Most of the 1994 increase occurred in the Far East and as a
result of the acquisition of Adamel Lhomargy (France). A majority of the 1993
decline occurred in our automotive durability simulation systems niche in Europe
which has not yet returned to order levels experienced in 1992. Conversely, in
1993, orders in this niche increased in North America as our customers benefited
from increasing car and truck sales. International orders were basically flat in
1992 compared to 1991. See Geographic Analysis of new orders for the percentage
breakdown by geographic area.
The backlog of undelivered orders at September 30, 1994, decreased 5% from 1993,
the result of a low first-quarter order rate. New orders in subsequent quarters
exceeded $50 million per quarter, reversing the decline in order backlog
experienced during most of 1993 and the first quarter of 1994. Quarterly order
rates in 1993 were weak in the second and third quarters but improved in the
fourth quarter. The strong fourth quarter order rate in 1992 of $63,185,000 was
the principal cause for the 20% increase in the 1992 order backlog.
REVENUES
1994 1993 1992
(expressed in thousands)
United States $ 101,747 $ 92,153 $ 68,931
International 98,803 97,346 92,082
Total $ 200,550 $189,499 $ 161,013
Consolidated revenues increased 6% in 1994 and 18% in 1993, reflecting the
improved U.S. market (see New Order table). For geographic revenues and income
information, see Note 2 of "Notes to Consolidated Financial Statements."
U.S. revenues increased 10% in 1994 and 34% in 1993, reflecting improved markets
for most of our business segments during this two-year period and, in
particular, for our Measurement and Automation Instrument sector. U.S. revenues
had declined 5% in 1992 as a result of a generally weak domestic market and,
specifically, a declining demand from our automotive customers.
International revenues represented 49%, 51%, and 57% of consolidated revenues
for 1994, 1993, and 1992 respectively. A significant portion of the Company's
international revenues are contracted for in foreign currencies. In 1994 the
value of the dollar weakened, increasing dollar values on foreign currency
revenue by $3,684,000. The value of the dollar strengthened in 1993,
particularly against European currencies, reducing dollar values on translated
foreign currency revenues by $2,372,000. The declining value of the dollar in
1992 increased international revenues by $6,755,000 which represented 94% of the
increase in international revenues that year.
Selective price increases and decreases were implemented in all three years.
However, the overall impact of pricing changes did not have a material effect on
reported sales volume.
GEOGRAPHIC ANALYSIS OF NEW ORDERS
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C>
UNITED STATES/CANADA 52% 55% 49% 46% 48% 54%
EUROPE/AFRICA/MIDDLE EAST 21 20 25 35 31 22
ASIA PACIFIC 26 23 25 18 18 22
SOUTH AMERICA/REST OF THE WORLD 1 2 1 1 3 2
</TABLE>
GROSS PROFIT
1994 1993 1992
(expressed in thousands)
Gross Profit $ 79,840 $ 78,882 $ 61,919
% of Revenues 39.8% 41.6% 38.5%
The 1994 gross profit percentage declined 1.8 percentage points from 1993,
primarily due to a higher-than-normal content of development costs in some large
customer projects. These contracts are nearing completion and should not
materially impact 1995. In 1993, the gross profit percentage increased 3.1
percentage points from 1992, reflecting increased revenues and a better economic
climate domestically for our higher-margin, short-delivery standard products.
Gross profit percentage for 1992 declined 5.8 percentage points from the 1991
ratio as a result of a combination of factors: lower-than-planned revenues,
an unfavorable revenue mix, large contracts with significant development
content similar to 1994, and higher-than-planned unabsorbed manufacturing
overhead expenses resulting from lower plant capacity utilization.
RESEARCH AND DEVELOPMENT
1994 1993 1992
(expressed in thousands)
R & D Expense $ 12,645 $13,697 $ 9,999
% of Revenues 6.3% 7.2% 6.2%
Product development spending (R&D) in 1994 decreased $1,052,000 or 8% compared
to 1993. However, 1993 product development spending, which had increased 37%
from 1992, included $1.8 million related to a large complex automotive contract
with significant software and controls development content.
The majority of the development expenditures in all three years was for software
and controls that will become the basis for our next generation of workstations.
Other development programs were directed at new measurement products, servo
motors and amplifiers, electromechanical load frames and accessories.
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES
1994 1993 1992
(expressed in thousands)
Selling/Marketing $ 40,351 $ 37,103 $ 34,660
General & Administrative 12,682 10,697 9,170
Total $ 53,033 $ 47,800 $ 43,830
% of Revenues 26.4% 25.2% 27.2%
Selling/Marketing expenses in 1994 increased $3,248,000 or 9% over 1993, of
which $1,348,000 (41%) was directly attributable to the Adamel Lhomargy
acquisition and $1,130,000 (35%) to the Measurement and Automation Instrument
sector to support its strong growth rate.
All three years were similar in that tight overall cost control was maintained
with resources being re-allocated from soft markets to markets with greater
potential. Investments in Korea (sales office), Europe (new resources for our
electromechanical products), and the acquisition of Custom Servo Motors
represented the majority of the increased selling expenses in 1993.
[graphic]
[caption:
TQM OBJECTIVE PROFILE
PRODUCT QUALITY
Most locations across the MTS organization are working toward ISO 9000
certification. The first to achieve it was our MTS Systems Limited, U.K. sales
and service subsidiary, pictured above receiving their ISO 9002 certification
plaque in mid-year.
Late in calendar year 1994, after the close of the fiscal year, our Sensors
Division in Cary, North Carolina, and our MTS Sensors Technologie subsidiary in
Ludenscheid, Germany received certification to ISO 9001. Our Mechanical Testing
& Simulation operations in the U.S. passed the audit and were recommended for
certification (expected in early 1995). Other divisions are working toward
passing their final audits in FY95.
By international consensus, the ISO 9000 standards are a distillation of the
best quality practices available. Typically, companies make use of a third-party
registrar to audit their quality system and verify that it meets ISO 9000
requirements. Successfully passing such an audit entitles the company to
publicize this achievement to its customers. The main benefit to our customers
is even higher product quality. To MTS it is lower costs through improved
business processes.]
The selling expense ratio expressed as a percent of new orders, was 21% in 1994,
21% in 1993, and 19% in 1992.
General and Administrative (G&A) expenses increased $1,985,000 or 19% in 1994
compared to 1993 due to the Adamel Lhomargy acquisition and adding resources in
internal systems/processes elsewhere in the company.
The 17% increase in G&A in 1993 over 1992 was due to restructuring costs of the
Machine Controls Division, the new Korean sales office, Custom Servo Motors
acquisition, expanded training initiatives, increased variable compensation
costs associated with higher earnings and, similar to 1994, investments in
personnel and internal systems. In 1992 G&A expenses had increased 9% over 1991.
INCOME
1994 1993 1992
(expressed in thousands)
Income Before Income Taxes $ 12,629 $ 14,937 $ 6,452
% of Revenues 6.3% 7.9% 4.0%
Net Income $ 8,659 $ 10,382 $ 4,915
% of Revenues 4.3% 5.5% 3.1%
Effective Tax Rate 31.4% 30.5% 23.8%
Return On Beginning
Equity Per Share 9.0% 11.9% 5.9%
Net Income Per Share $ 1.85 $ 2.27 $ 1.07
Income before income taxes (pretax income) decreased $2,308,000 or 16% from 1993
as a result of the significant development costs incurred on specific
leading-edge technology projects, which affected gross margin, and the
$2,065,000 charge to operations for a work-force reduction offset by a
non-operating gain of $3,930,000 realized from the sale of our old Berlin,
Germany facility. Pretax income in 1993 increased 132% from a pretax income in
1992 that was well below company expectations. Several factors affected 1992:
lower-than-planned revenues, a revenue mix with more than normal leading-edge
technology projects containing significant development content,
under-utilization of plant capacity, planned accelerated internally funded
R&D projects, and charges associated with employee terminations and early
retirements.
Net income in all three years benefited from an effective tax rate that was
lower than the federal statutory tax rate, primarily from Research and
Development tax credits and tax benefit of the Company's Foreign Sales
Corporation. See Note 4 of "Notes to Consolidated Financial Statements" for the
reconciliation between the federal statutory and effective income tax rates and
other related tax information.
IMPACT OF FOREIGN CURRENCIES
Throughout 1994, the dollar weakened against all major foreign currencies, which
increased foreign currency denominated revenue by $3,684,000.
In 1993, European currency exchange rates weakened against the dollar while the
Japanese yen continued to strengthen. As a result, translated foreign currency
revenues were reduced by $2,372,000.
Foreign currency exchange rates were unstable during 1992 but, generally, the
direction was a weakening of the dollar. This increased foreign-denominated
sales, costs, and expenses by approximately 15%. This had the effect of
increasing reported revenues by $6,400,000.
The Company recorded foreign currency transaction gains of $1,058,000, $564,000,
and $221,000 for the years 1994, 1993, and 1992, respectively.
The Company's foreign currency risk-management program principally involves
entering into forward foreign currency hedge contracts, options, and foreign
currency denominated loans. On September 30, 1994, there were open currency
hedge contracts with various settlement dates, totaling $3,058,000. These are
targeted to limit transaction exposures where equipment and services costs are
incurred in U.S. dollars and the customer contracts in a foreign currency.
[graphic]
[caption:
TQM OBJECTIVE PROFILE
PRODUCTIVITY
Employees in our Mechanical Testing & Simulation sector have achieved continuous
improvements in inventory utilization for several years. We first installed our
current generation of MRP II systems in 1985. Since that time, the material
assets required for supporting the business have shown a compounded improvement
in usage of 4.90% per year, or a total of 54%. This has resulted in a savings of
over $10 million in required inventory. Additionally, the supporting teams in
our stores and warehousing functions have achieved superior quality results, as
demonstrated by the 100% accuracy of our continuous cycle count test audits.
This high quality of information is vital to supporting our manufacturing,
planning and control processes.]
LIQUIDITY AND CAPITAL RESOURCES
1994 1993 1992
(expressed in thousands)
Working Capital $ 56,845 $ 56,484 $ 50,212
Current Ratio 1.9 1.8 2.0
Total Interest
Bearing Debt $ 23,851 $ 33,299 $ 19,335
% of Shareholders'
Investment 23.8% 35.8% 22.7
%Shareholders'
Investment $ 100,046 $ 93,011 $ 84,992
Per Share $ 21.90 $ 20.47 $ 19.04
Cash and cash-equivalent balances in 1994 decreased to $4,919,000 from the
$7,597,000 reported at September 30, 1993. The $2,678,000 difference was
essentially used to reduce indebtedness. The 1994 direct measurements of
liquidity were comparable to 1993, as the relationship of current assets to
current liabilities (current ratio) increased slightly from 1.8 to 1.9. Cash,
cash equivalents, and accounts receivable in relation to current liabilities
(liquidity ratio) decreased slightly to 1.3 from 1.4.
Expenditures for property, plant, and equipment were $17,401,000 in 1994,
$5,073,000 in 1993, and $7,321,000 in 1992. Plant expenditures of $12,039,000 in
1994 were for a new facility to support our Berlin, Germany, operations. Sale of
our existing facility, in Berlin, partially offset this investment and resulted
in a non-operating gain of $3,930,000. 1992 expenditures for plant construction
costs were primarily for the expansion of the Sensors Division plant located in
Raleigh, North Carolina. The majority of the plant and equipment expenditures in
all years, other than for plant construction and facility purchase, was for
required operating equipment and the upgrading of existing facilities. The
fiscal 1995 capital expenditure plan includes continued upgrading of the newly
acquired Berlin, Germany facility. Other planned expenditures for plant and
equipment are not expected to exceed depreciation for the year.
Total interest-bearing debt as a percent of shareholders' investment decreased
to 24% by September 30, 1994, reflecting cash flow from earnings and reduction
of unbilled contract and retainage receivables. See Consolidated Statement of
Cash Flows for specific sources and use of cash.
At the end of fiscal 1994 the Company was in compliance with or had obtained the
required waivers to maintain compliance with the terms of its various debt
covenants. See Note 3 of "Notes to Consolidated Financial Statements" for
additional information on financing.
Shareholders' investment exceeded $100 million as of September 30, 1994, and
equalled $21.90 per share. This compared to $20.47 in 1993 and $19.04 in 1992.
In addition to increases from undistributed net earnings, shareholders'
investment was increased over the three-year period from proceeds totaling
$4,822,000 from the exercise of employee stock options and participation in the
employee stock purchase plan (275,204 common shares). It was reduced by
expenditures for common stock repurchases (162,833 common shares) totaling
$3,844,000.
In 1992, the Board of Directors authorized the repurchase of 200,000 common
shares in the open market within the guidelines as established by the Securities
and Exchange Commission (SEC). By September 30, 1994, 16,155 common shares had
been acquired under this authorization. The remaining 183,845 shares may be
acquired during 1995. The Board may then authorize additional repurchases.
The Company believes that its 1995 anticipated cash flows from operations, a
forecast decrease in unbilled contract and retainage receivables, and its
short-term lines of credit will adequately finance ongoing operations, allow for
the possible completion of the common-stock repurchase program and other
strategic acquisitions.
1994 QUARTERLY STOCK ACTIVITY
Dollar Shares
Range (1) Traded (2)
First Quarter 27-3/4 - 31 569,200
Second Quarter 29-5/8 - 31-3/4 704,000
Third Quarter 25-3/4 - 29 332,300
Fourth Quarter 22-3/4 - 28-1/4 433,800
(1) Source: Wall Street Journal
(2) Source: Barron's
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter-to-quarter revenues and earnings comparisons will not necessarily
accurately reflect changes in operating efficiency or market demand. Addition-
ally, if a scheduled delivery date is delayed or accelerated on one or more
high-value systems, which are not accounted for under the
percentage-of-completion accounting method, revenues and earnings can be
significantly affected. This situation is a common challenge that confronts MTS
and similar companies that produce high-value custom equipment. The use of the
percentage-of-completion method to recognize revenue on large, long-term
projects helps to alleviate this situation. (See Note 1 of "Notes to Consoli-
dated Financial Statements"). Even though MTS has introduced several standard
and semi-custom systems, the leading-edge applications of the Company's
technology will continue to be in the fairly high-value systems which are the
primary source of "system level" product development. Undertaking
state-of-the-art customer projects is equally essential to long-term growth and
market share as is company-funded new product development. While accepting such
orders does make MTS prone to quarter-to-quarter swings in revenue volume and
earnings, management believes these programs have significant long-term
benefits for the Company.
Quarterly earnings will also vary based on the use of estimated, effective
income tax rates for providing federal, state, and foreign income taxes. See
Note 4 of "Notes to Consolidated Financial Statements" for the reconciliation
between the statutory and effective income tax rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
(September 30)
Selected quarterly financial information, for the three fiscal years ended
September 30, 1994, is presented below.
First Second Third Fourth Total
Quarter Quarter Quarter Quarter Year
(expressed in thousands except per share data)
1994
Revenues $47,241 $46,357 $48,468 $58,484 $200,550
Gross margin 19,443 17,380 18,902 24,115 79,840
Pretax income 3,526 5,015 1,442 2,646 12,629
Net income $ 2,361 $ 3,181 $ 1,002 $ 2,115 $ 8,659
Income per share $ .51 $ .68 $ .21 $ .45 $ 1.85
1993
Revenues $40,016 $43,168 $48,824 $57,491 $189,499
Gross margin 16,705 17,871 20,127 24,179 78,882
Pretax income 2,462 3,373 4,361 4,741 14,937
Net income $ 1,674 $ 2,187 $ 2,864 $ 3,657 $ 10,382
Income per share $ .37 $ .48 $ .63 $ .79 $ 2.27
1992
Revenues $32,418 $39,876 $38,850 $49,869 $161,013
Gross margin 13,488 15,753 14,352 18,326 61,919
Pretax income 1,122 2,121 1,066 2,143 6,452
Net income $ 796 $ 1,431 $ 742 $ 1,946 $ 4,915
Income per share $ .17 $ .31 $ .16 $ .43 $ 1.07
[graphic]
[caption:
TQM OBJECTIVE PROFILE
CUSTOMER SATISFACTION
MTS field service capabilities are a source of significant competitive advantage
for our Mechanical Testing and Simulation sector. In our latest 1993 worldwide
customer satisfaction survey, 91% of those surveyed indicated that they were
either satisfied or very satisfied with MTS field service--up from 81% in 1989.
In addition, of those surveyed, 88% indicated that they were more satisfied with
MTS service than with our competitors'--up from 76% in 1989.
In North America, service support is provided through our HELPLine toll-free
service communications system. Call takers connect customers to the help they
need--whether it's to schedule a visit by the local service engineer; seek
answers to technical questions via the MTS Technical Support Group; order parts
or repairs from the MTS Order Services staff; or schedule training in an MTS
training or consulting course.
Internationally, MTS provides field service support locally through our
worldwide sales and service offices or through our service representatives. The
MTS Technical Support Group and Order Services staff in Minneapolis are
available to provide support to our worldwide field staff and customers.]
CONSOLIDATED BALANCE SHEETS
(September 30)
ASSETS 1994 1993
(expressed in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 4,919 $ 7,597
Accounts receivable, net of allowance
for doubtful accounts of $1,439 and $1,461 44,534 41,841
Unbilled contracts and retainage receivable 35,584 47,066
Inventories 35,152 25,009
Prepaid expenses 3,017 1,932
Total current assets 123,206 123,445
PROPERTY AND EQUIPMENT:
Land 3,703 3,725
Buildings and improvements 36,452 27,532
Machinery and equipment 50,803 45,376
Accumulated depreciation (43,590) (39,379)
Total property and equipment, net 47,368 37,254
OTHER ASSETS 5,134 5,017
$ 175,708 $ 165,716
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Notes payable to banks $ 17,007 $ 28,602
Current maturities of long-term debt 1,516 2,194
Accounts payable 10,969 6,882
Accrued compensation and benefits 18,058 16,085
Advance billings to customers 9,660 7,324
Other accrued liabilities 8,170 5,148
Accrued income taxes 981 726
Total current liabilities 66,361 66,961
DEFERRED INCOME TAXES 3,973 3,241
LONG-TERM DEBT 5,328 2,503
SHAREHOLDERS' INVESTMENT:
Common stock, 25(cent) par;
16,000,000 shares authorized:
4,568,374 and 4,543,603 shares
issued and outstanding 1,142 1,136
Additional paid-in capital 2,928 2,677
Retained earnings 91,762 85,661
Cumulative translation adjustment 4,214 3,537
Total shareholders' investment 100,046 93,011
$ 175,708 $ 165,716
The accompanying Notes to Consolidated Financial Statements are an integral part
of these balance sheets.
CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS' INVESTMENT
(For the years
Ended September 30)
INCOME 1994 1993 1992
(expressed in thousands except for share data)
NET SALES $ 200,550 $ 189,499 $ 161,013
COST OF SALES 120,710 110,617 99,094
GROSS PROFIT 79,840 78,882 61,919
OPERATING EXPENSES:
Selling 40,351 37,103 34,660
General and administrative 12,682 10,697 9,170
Research and development 12,645 13,697 9,999
Interest expense 2,150 1,722 1,197
Interest income (290) (515) (493)
Other expense, net (327) 1,241 934
TOTAL OPERATING EXPENSES 67,211 63,945 55,467
INCOME BEFORE INCOME TAXES 12,629 14,937 6,452
PROVISION FOR INCOME TAXES 3,970 4,555 1,537
NET INCOME $ 8,659 $ 10,382 $ 4,915
NET INCOME PER SHARE $ 1.85 $ 2.27 $ 1.07
AVERAGE COMMON SHARES OUTSTANDING 4,668 4,572 4,595
SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Common Stock Additional Cumulative
Shares Paid-In Retained Translation
Issued Amount Capital Earnings Adjustment
(dollars expressed in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1991 4,444,019 $ 1,111 $ 1,921 $ 75,194 $ 2,513
Exercise of stock options 90,645 22 1,455 -- --
Translation adjustment -- -- -- -- 1,733
Common stock purchased and retired (71,361) (18) (1,703) -- --
Net income -- -- -- 4,915 --
Cash dividends, 48(cent)per share -- -- -- (2,151) --
BALANCE, SEPTEMBER 30, 1992 4,463,303 1,115 1,673 77,958 4,246
Exercise of stock options 119,749 30 2,112 -- --
Translation adjustment -- -- -- -- (709)
Common stock purchased and retired (51,433) (12) (1,165) -- --
Acquisition through pooling of interests 11,984 3 57 (531) --
Net income -- -- -- 10,382 --
Cash dividends, 48(cent)per share -- -- -- (2,148) --
BALANCE, SEPTEMBER 30, 1993 4,543,603 1,136 2,677 85,661 3,537
Exercise of stock options 64,810 16 1,187 -- --
Translation adjustment -- -- -- -- 677
Common stock purchased and retired (40,039) (10) (936) -- --
Net income -- -- -- 8,659 --
Cash dividends, 56(cent)per share -- -- -- (2,558) --
BALANCE, SEPTEMBER 30, 1994 4,568,374 $ 1,142 $ 2,928 $ 91,762 $ 4,214
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(For The Years Ended September 30)
<TABLE>
<CAPTION>
1994 1993 1992
(expressed in thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 8,659 $ 10,382 $ 4,915
Adjustments to reconcile
net income to net cash
from operating activities:
Depreciation and amortization 6,214 5,648 5,789
Deferred income taxes 731 96 (449)
Gain from sale of land and building (3,930) (658) --
Translation adjustment 677 (709) 1,733
Changes in operating
assets and liabilities:
Accounts receivable,
unbilled contracts, and retainages 8,789 (22,591) (5,647)
Inventories (10,143) (1,418) (772)
Prepaid expenses (1,085) (187) 467
Accrued income taxes 255 (3,045) (1,094)
Advance billings to customers 2,336 (556) 4,507
Other assets and liabilities, net 9,084 2,588 3,036
NET CASH PROVIDED BY
(USED FOR) OPERATING ACTIVITIES 21,587 (10,450) 12,485
INVESTING ACTIVITIES
Property and equipment additions, net (6,901) (4,576) (5,900)
Plant purchases and new construction, net (11,277) (92) (1,421)
Proceeds from sale of land and building 6,131 750 --
Other assets (469) (93) 2,198
NET CASH USED IN INVESTING ACTIVITIES (12,516) (4,011) (5,123)
FINANCING ACTIVITIES
Net borrowings under notes payable to banks (11,595) 16,295 3,495
Proceeds from issuance of long-term debt 4,341 -- 2,721
Repayments of long-term debt (2,194) (2,331) (7,446)
Cash dividends (2,558) (2,148) (2,151)
Proceeds from employee stock option
and stock purchase plans 1,203 2,142 1,477
Payments to purchase and
retire common stock (946) (1,177) (1,721)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,749) 12,781 (3,625)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,678) (1,680) 3,737
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,597 9,277 5,540
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,919 $ 7,597 $ 9,277
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid during the year for:
Interest $ 2,069 $ 1,743 $ 1,275
Income taxes 3,715 7,600 2,631
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION AND TRANSLATION
The consolidated financial statements include the accounts of MTS SYSTEMS
CORPORATION (the Company) and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
All balance sheet accounts of foreign subsidiaries are translated at the current
exchange rate as of the end of the accounting period. Income statement items are
translated at average currency exchange rates. The resulting translation
adjustment is recorded as a separate component of shareholders' investment.
Gains and losses resulting from foreign currency transactions are included in
"Other expense, net" in the Consolidated Statements of Income. These
transactions resulted in a net exchange gain of $1,058,000 in 1994, $564,000 in
1993, and $221,000 in 1992.
The Company has a foreign currency risk management program which principally
involves entering into forward foreign currency hedge contracts, options, and
foreign currency denominated loans to address specific exposures related to
future foreign currency transactions. On September 30, 1994, there were open
hedge and options contracts, with October 31, 1994 settlement dates, totaling
$3,058,000.
[graphic]
[caption:
TQM OBJECTIVE PROFILE
PRODUCT QUALITY
Our Sensors Division has made great strides in meeting our TQM Product Quality
goal of reducing at a rate of 10% per year the cost of non-conformance to
specifications. While significant progress has been made in all areas, one of
the most successful endeavors involved reducing material scrap in the production
of our displacement transducers.
Through investments made in this core product to better understand our processes
and the characteristics of the raw materials, we were able to not only reduce
scrap, but produce higher-performing sensors. For the division, this and other
improvements allowed us to reduce by 1/3 our cost of nonconformance as a
percentage of revenue, and to gain market share.]
REVENUE RECOGNITION
Revenue is recognized upon shipment of equipment when the customer's order can
be manufactured, delivered and installed in less than twelve months. Revenue on
contracts requiring longer delivery periods (long-term contracts) and other
customized orders that permit progress billings is recognized using the
percentage-of-completion method based on the cost incurred to date relative to
estimated total cost of the contract (cost-to-cost method). The cumulative
effects of revisions of estimated total contract costs and impact on revenues
are recorded in the period in which the facts become known. When a loss is
anticipated on a contract, the amount is provided currently.
LONG-TERM CONTRACTS
The Company enters into long-term contracts for customized equipment sold to its
customers. Under terms of certain contracts, revenue recognized using the
percentage of completion method may not be invoiced until completion of
contractual milestones, upon shipment of the equipment, or upon installation and
acceptance by the customer. Unbilled amounts for such contracts appear in the
Consolidated Balance Sheets as unbilled contracts and retainage receivable.
Amounts unbilled or retained at September 30, 1994 are expected to be invoiced
as follows: $31,383,000 in 1995 and $4,201,000 in 1996.
Long-term contracts consider the duration of the manufacturing and collection
cycles at the time the contract is bid. Accordingly, Accounts Receivable in the
accompanying Consolidated Balance Sheets approximate fair value.
WARRANTY OBLIGATIONS
The Company warrants its products against defects in materials and workmanship
under normal use and service, generally for one year. The Company maintains
reserves for warranty costs based upon its past experience with warranty
claims.
CASH EQUIVALENTS
Cash equivalents represent short-term investments which have an original
maturity of 90 days or less. Accordingly, the amounts shown on the accompanying
Consolidated Balance Sheets approximate fair value.
ACCOUNTS RECEIVABLE
The Company grants credit to customers, but generally does not require
collateral or other security from domestic customers. International receivables,
where deemed necessary, are supported by letters of credit from reputable
banking institutions.
INVENTORIES
Inventories consist of material, labor and overhead and are stated at the lower
of first-in, first-out cost or market. Inventory components as of September 30,
were as follows:
1994 1993
(expressed in thousands)
Customer projects in
various stages of completion $ 14,336 $ 7,394
Components, assemblies and parts 20,816 17,615
Total $ 35,152 $ 25,009
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Additions, replacements and
improvements are capitalized at cost, while maintenance and repairs are charged
to operations as incurred. Depreciation is provided over the following estimated
useful lives of the property:
Building and building improvements: 10 to 40 years.
Machinery and equipment: principally 5 to 10 years.
Most major building and equipment purchases are depreciated on a straight-line
basis for financial reporting purposes and on an accelerated basis for income
tax purposes.
OTHER ASSETS
Other assets consist principally of patents and excess cost over net assets
acquired, net of accumulated amortization, ($3,304,000 and $3,567,000 in 1994
and 1993, respectively). These assets are being amortized over various periods
from 8 to 40 years.
RESEARCH AND DEVELOPMENT
Research and product development costs associated with new products are charged
to operations as incurred.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of shares of common stock and common stock equivalents outstanding in
each period. Fully diluted and primary net income-per-share amounts are
approximately equivalent for the years presented.
ACQUISITION
In October 1992 the Company exchanged 11,984 shares of its common stock for all
of the outstanding shares of Custom Servo Motors, Inc. The transaction was
accounted for as a pooling of interests.
In April 1994 the Company completed the purchase of 100% of the stock of Adamel
Lhomargy, a French manufacturer of material testing systems, for cash and
assumption of debt. The transaction was accounted for by the purchase method of
accounting.
Financial data for prior periods have not been restated for these acquisitions
as both assets and operations were not material to the Company's Consolidated
Financial Statements.
[graphic]
[caption:
TQM OBJECTIVE PROFILE
PRODUCTIVITY
Several improvements in the Cell 3 production line at our Sensors Division have
resulted in significant reductions in the time it takes to assemble and ship
liquid level sensors. These include the implementation of a demand-based
stocking system and subassembly production line, consolidated purchasing of
shipping materials and automation of several production stations. In addition,
MTS now shares forecast and stock level information with key material suppliers
and has developed purchasing contracts for turnkey subassemblies.
Results include an increase in on-time shipments of 25% and a reduction in order
fulfillment lead times from 3.4 weeks in 1993 to 1.4 weeks in 1994.]
2. GEOGRAPHIC SEGMENT INFORMATION:
The Company designs, manufactures, and markets hardware and software products
and services which customers use to improve product quality, reduce the duration
of product development and increase machine and worker productivity. The
Company's markets are varied, but its offerings share common
components--measuring and actuation devices and electronic controls with
application software.
The Company markets such components as its only offering and, accordingly, has
reported the results of operations as a single industry in the Consolidated
Statements of Income. A geographic summary of the Company's operations and
related year-end asset information for each of the three years in the period
ended September 30, 1994 follows:
<TABLE>
<CAPTION>
International
-----------------------------------------------------
United Elimi- Consoli-
States Far East Europe Other nations dated
(expressed in thousands)
OPERATIONS FOR THE YEAR
ENDED SEPTEMBER 30, 1994
<S> <C> <C> <C> <C> <C> <C>
Net sales $101,747 $ 45,541 $45,099 $ 8,163 $ -- $ 200,550
Transfers between
geographic areas -- 19,343 15,439 871 (35,653) --
Total $101,747 $ 64,884 $60,538 $ 9,034 $ (35,653) $ 200,550
Income (loss) before income taxes $ 7,736 $ 4,010 $ 1,242 $ (359) $ -- $ 12,629
OPERATIONS FOR THE YEAR
ENDED SEPTEMBER 30, 1993
Net sales $ 92,153 $ 46,490 $43,633 $ 7,223 $ -- $ 189,499
Transfers between
geographic areas 366 16,914 10,815 1,321 (29,416) --
Total $ 92,519 $ 63,404 $54,448 $ 8,544 $ (29,416) $ 189,499
Income (loss) before income taxes $ 9,340 $ 5,031 $ 956 $ (390) -- $ 14,937
OPERATIONS FOR THE YEAR
ENDED SEPTEMBER 30, 1992
Net sales $ 68,931 $ 35,687 $48,864 $ 7,531 $ -- $ 161,013
Transfers between
geographic areas 20 8,694 13,767 1,598 (24,079) --
Total $ 68,951 $ 44,381 $62,631 $ 9,129 $ (24,079) $ 161,013
Income (loss) before income taxes $ 4,280 $ 2,282 $ (362) $ 252 -- $ 6,452
IDENTIFIABLE ASSETS
AT SEPTEMBER 30:
1994 $154,954 $ 19,454 $40,825 $ 791 $ (40,316) $ 175,708
1993 162,090 24,135 24,661 527 (45,697) 165,716
1992 134,132 15,854 31,749 880 (37,965) 144,650
</TABLE>
Transfers between geographic areas are made at prices which allow appropriate
markup to the manufacturing or selling unit. Income before income taxes includes
allocation of research and development, selling, general and administrative, and
interest expenses.
3. FINANCING:
Long-term debt as of September 30 follows:
<TABLE>
<CAPTION>
1994 1993
(expressed in thousands)
<S> <C> <C>
9.5% Notes, due in annual installments of $494,000 in 1995 and
$1,481,000 in 1996, unsecured $ 1,975 $ 2,353
8.3% Note, due in installments of $288,000 in 1995 and
1996, unsecured 576 1,304
7.55% Note, due in 1996, unsecured 2,234 --
4.75% Note, due in installments of $185,000 in 1995 and
1996, unsecured 370 --
3.5% Note, due in installments of $546,000 in 1995, $424,000 in 1996,
$484,000 in 1997, and $230,000 in 1998, unsecured 1,685 --
10.375% Senior Notes, retired in 1994, unsecured -- 750
8.5% Industrial Development Revenue Bonds of the
City of Eden Prairie, Minnesota retired in 1994 -- 270
Other 4 20
TOTAL $ 6,844 $ 4,697
LESS--CURRENT MATURITIES (1,516) (2,194)
TOTAL LONG-TERM DEBT $ 5,328 $ 2,503
</TABLE>
Aggregate annual maturities of long-term debt for the next five fiscal years are
as follows: 1995--$1,516,000; 1996--$4,614,000; 1997--$483,000; 1998--$231,000;
and none thereafter. The carrying value of the Company's long-term debt at
September 30, 1994, approximates the fair value at current interest rates
offered to the Company for debt of the same remaining maturities.
The Company has credit agreements with two domestic banks totaling $30,000,000.
One credit agreement, for $5,000,000, permits the Company to issue domestic and
Euro-currency notes. The other credit agreement, for $25,000,000, permits the
Company to issue domestic notes, Euro-currency notes, and banker's acceptances.
As part of the same credit agreement, and within the $25,000,000 limit, the bank
has agreed to issue term loans up to a maximum of $10,000,000 until January 31,
1995. This agreement provides for repayment of these term loans through March
1997. The Company compensates both banks with loan commitment fees on the unused
portion of the credit lines. The Company also has four uncommitted lines of
credit with banks that total $40,000,000. In addition, the Company has standby
letter-of-credit lines totaling $15,000,000. At September 30, 1994, standby
letters of credit outstanding totaled $5,487,000.
Under terms of its notes and credit agreements, The Company has agreed, among
other matters, that it will (a) maintain defined minimum cash flow or fixed
charge coverage; (b) limit additional long-term borrowings; and (c) limit common
stock repurchases. As of September 30, 1994, $20,600,000 of retained earnings is
available for distribution and $7,345,000 is available for repurchase of common
shares under the provisions of the agreements. The Company was in compliance
with or had obtained the required waivers to maintain compliance with the terms
of its note and credit agreements and its lines of credit at September 30, 1994.
Information on short-term borrowings for the years ended September 30 follows.
1994 1993 1992
(expressed in thousands)
Average balance outstanding $ 23,702 $ 21,409 $ 5,384
Maximum balance outstanding 30,202 29,446 14,600
Year-end interest rate 5.8% 3.9% 4.2%
Weighted-average interest rate 4.4% 3.9% 4.5%
4. INCOME TAXES:
The provision for income taxes for the years ended September 30 consisted of:
1994 1993 1992
(expressed in thousands)
Currently payable (receivable):
Federal $2,249 $2,378 $ 1,419
State 411 411 304
Foreign 1,203 1,604 (290)
Deferred:
Federal 95 142 92
State 12 20 12
Total provision $3,970 $4,555 $ 1,537
A reconciliation from the Federal statutory income tax rate to the Company's
effective rate for the years ended September 30 follows:
1994 1993 1992
Statutory rate 35% 35% 34%
Tax benefit of FSC (4) (4) (8)
Foreign provision
in excess of U.S. tax rate 5 3 --
State income taxes,
net of Federal benefit 2 2 3
Research and development
tax credits (4) (4) (6)
Other, net (3) (2) 1
Effective rate 31% 30% 24%
Deferred tax assets and liabilities are recorded for the differences between the
amounts reported for financial reporting and income tax purposes. Components of
the net deferred tax liabilities as of September 30 were as follows:
DEFERRED TAX ASSETS:
1994 1993
(expressed in thousands)
Accrued payroll/benefits $1,547 $1,027
Inventory reserves 1,162 693
Accounts receivable 113 282
Other assets 187 216
TOTAL DEFERRED TAX ASSET $3,009 $2,218
DEFERRED TAX LIABILITIES:
1994 1993
Property, plant, equipment $4,050 $2,963
Real estate tax accrual 266 430
Other liabilities 23 178
TOTAL DEFERRED TAX LIABILITY $4,339 $3,571
NET DEFERRED TAX LIABILITY $1,333 $1,353
The Company's Foreign Sales Corporation (FSC) has no cumulative earnings. Tax
benefits on foreign sales and tax credits arising from foreign taxes paid and
expenditures for qualifying research and development are recorded as a reduction
of the provision for income taxes in the year the related item occurs.
The Financial Accounting Standards Board has released a statement on Accounting
for Income Taxes. The Company has adopted this statement effective October 1,
1993; the effect of such adoption did not have a significant impact on the
Company's financial position or results of operations.
5. STOCK OPTIONS:
The Company has made certain stock-based awards to its officers, non-employee
directors, and key employees under various stock plans. Awards under these plans
can include incentive stock options (qualified), non-qualified options, stock
appreciation rights, restricted stock, deferred stock, and other stock-based and
non stock-based awards. At September 30, 1994, the Company has awarded,
primarily incentive stock options and non-qualified stock options. These were
granted at exercise prices that are 100% of the fair-market value at the date of
grant. Beginning one year after grant, the options generally can be exercised
proportionately each year for periods of three, four, and six years, as defined
in the respective plans.
Option holders may exercise options by delivering Company stock already owned,
cash, or a combination of stock and cash. The shares tendered in the exchange
are cancelled and, therefore, reduce shares issued. During 1994 and 1993, option
holders exchanged 20,655 and 31,558 shares, respectively, of the Company's
stock in payment of options exercised.
Under the Plans, options for 487,534 shares are outstanding at $13.00 to $31.75
per share, of which options for 285,614 shares were exercisable at September 30,
1994. Another 432,984 options remain available for granting beyond September
30, 1994. During 1994 and 1993, options for 65,927 and 109,564 shares were
exercised at prices of $13.00 to $25.38 and $13.00 to $23.50 per share,
respectively.
In January, 1992, the Company's shareholders authorized an Employee Stock
Purchase Plan (the Purchase Plan), whereby 250,000 shares of the Company's
common stock were reserved for sale to employees until April 2002. Participants
in the Purchase Plan are granted options to purchase shares at 95% of the
market price of the Company's common stock at dates specified in the Purchase
Plan. Participants were issued 19,538 shares in 1994. During fiscal 1994,
participants subscribed to purchase 17,600 shares for issuance in fiscal 1995.
6. EMPLOYEE BENEFIT PLANS:
The Company's profit sharing plan functions as a retirement program for most
U.S. and certain international employees. Employees who have completed 1,000
hours of service during the plan year are eligible to participate. The formula
for calculating the Company's contribution is approved annually by the Board of
Directors and is based primarily on operating results for the year, before
management variable compensation. The plan provides for a minimum contribution
of 4% of participant compensation, as defined, up to the social security taxable
wage base, and 8% of participant compensation in excess of the taxable wage
base, so long as this calculation does not exceed pretax income. The
contributions for 1994, 1993, and 1992 were 4.3%, 4.2%, and 4.2% of participant
compensation, respectively. The provisions for profit sharing were $2,281,000 in
1994, $2,118,000 in 1993, and $1,945,000 in 1992 and are distributed among the
various operating expenses shown in the accompanying Consolidated Statements
of Income.
The Company's subsidiary located in Berlin has a noncontributory, unfunded
retirement plan for eligible employees. Total pension expense relating to this
plan was $455,000 in 1994, $300,000 in 1993, and $270,000 in 1992. As of
September 30, 1994, the most recent actuarial valuation date, the accrued
liabilities associated with this plan are included in the Consolidated Balance
Sheets and are approximately equal to the actuarial present value of accumulated
plan benefits. The assumed rate of return used in determining the actuarial
present value of accumulated plan benefits was 8.0%.
7. SUBSEQUENT EVENT
In November, 1994 The Company acquired the stock of Power-Tek, Inc. of
Farmington Hills, Michigan (in a transaction that will be treated as an asset
purchase) for an initial payment of cash and a future payment based upon
performance. Power-Tek manufactures dynamometers and clean-air testing systems
for the auto, truck and construction equipment industries. The company will
operate as a wholly owned subsidiary and will be known as MTS-PowerTek, Inc.
REPORTS ON CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO MTS SYSTEMS CORPORATION:
We have audited the accompanying consolidated balance sheets of MTS SYSTEMS
CORPORATION (a Minnesota corporation) AND SUBSIDIARIES as of September 30, 1994
and 1993, and the related consolidated statements of income, shareholders'
investment, and cash flows for each of the three years in the period ended
September 30, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MTS Systems Corporation and
Subsidiaries as of September 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1994 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
November 29, 1994
REPORT OF MANAGEMENT
The management of MTS Systems Corporation is responsible for the integrity and
objectivity of the financial information presented in this Report. The financial
statements have been prepared in accordance with generally accepted accounting
principles and include certain amounts based on management's best estimates
and judgment.
Management is also responsible for establishing and maintaining the Company's
accounting systems and related internal controls, which are designed to provide
reasonable assurance that assets are safeguarded, transactions are properly
recorded, and the policies and procedures are implemented by qualified
personnel.
The Audit Committee of the Board of Directors, which is comprised solely of
outside directors, meets regularly with management and its independent auditors
to review audit activities, internal controls, and other accounting, reporting,
and financial matters. This Committee also recommends independent auditors for
appointment by the full Board, subject to shareholder ratification.
The financial statements included in this annual report have been audited by
Arthur Andersen LLP, independent public accountants. We have been advised that
their audits were conducted in accordance with generally accepted auditing
standards and included such reviews of internal controls and tests of
transactions as they considered necessary in setting the scope of their audits.
Donald M. Sullivan
Chairman and
Chief Executive Officer
/s/ Donald M. Sullivan
Marshall L. Carpenter
Vice President and
Chief Financial Officer
/s/ Marshall L. Carpenter
EXHIBIT 21
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
OF THE COMPANY
Incorporation
Name Jurisdiction
MTS Systems (Hong Kong) Inc. Minnesota, U.S.A.
MTS Testing Systems (Canada) Ltd. Canada
MTS Systems GmbH Germany
MTS Sensors Technologie GmbH and Co. KG Germany
MTS Systems France France
MTS (Japan) Ltd. Japan
MTS Systems Limited (London) United Kingdom
MTS Systems SRL (Italy) Italy
MTS International, Ltd. West Indies
MTS Systems Norden AB Sweden
MTS Sistemas do Brasil, Ltda. Brazil
MTS Systems (China) Inc. Peoples Republic of China
Custom Servo Motors, Inc. Minnesota, U.S.A.
MTS Korea, Inc. Republic of Korea
Adamel Lhomargy S.A. France
MTS Holdings France, SARL France
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements on Form S-8 (Registration
Nos. 2-99389, 33-21699, 33-35288, 33-45386 and 33-45386.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
December 22, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-1-1993
<PERIOD-END> SEP-30-1994
<CASH> 4,919
<SECURITIES> 0
<RECEIVABLES> 81,557
<ALLOWANCES> 1,439
<INVENTORY> 35,152
<CURRENT-ASSETS> 123,206
<PP&E> 90,958
<DEPRECIATION> (43,590)
<TOTAL-ASSETS> 175,708
<CURRENT-LIABILITIES> 66,361
<BONDS> 5,328
<COMMON> 1,142
0
0
<OTHER-SE> 94,690
<TOTAL-LIABILITY-AND-EQUITY> 175,708
<SALES> 200,550
<TOTAL-REVENUES> 200,550
<CGS> 120,710
<TOTAL-COSTS> 67,211
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 2,150
<INCOME-PRETAX> 12,629
<INCOME-TAX> 3,670
<INCOME-CONTINUING> 12,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,659
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
</TABLE>
