MTS Reports Fiscal 2020 Third Quarter Financial Results
EDEN PRAIRIE, Minn., Aug. 3, 2020 /PRNewswire/ -- MTS Systems Corporation (Nasdaq: MTSC), a leading global supplier of advanced test systems, motion simulators and precision sensors, today reported financial results for its fiscal year 2020 third quarter ended June 27, 2020.
THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
-- Positive operating cash flow of $16.0 million
-- Backlog of $451.4 million, an increase of 1.8% over prior year
-- Revenue of $196.2 million, a decline of 15.5% over prior year,
reflecting the global impact of the COVID-19 pandemic
-- GAAP diluted earnings per share of $0.23, including $0.08 of discrete
tax benefits
-- Adjusted diluted earnings per share of $0.44, including $0.26 of
amortization expense
-- Subsequent to quarter end, amended revolving credit facility to enhance
operating and financial flexibility
FINANCIAL TABLE
Three Months Ended
Nine Months Ended
June 27,
June 29,
June 27,
June 29,
2020 2019 2020 2019
(in thousands, except per share data - unaudited)
---
Revenue $
196,225 $
232,209 $
613,531 $
668,436
Revenue % increase (decrease) (15.5)
% 19.3
% (8.2)
% 15.2
%
Gross margin 33.4
% 36.6
% 34.8
% 37.5
%
Operating margin 6.4
% 9.9
% 5.8
% 9.7
%
Earnings before taxes $
3,351 $
16,190 $
8,737 $
44,463
Net income 4,389 13,585 8,624 38,246
Diluted earnings per share 0.23 0.70 0.45 1.97
Adjusted diluted earnings per share(1) 0.44 0.71 1.08 2.07
Adjusted EBITDA(1) 28,800 35,357 89,954 103,013
Cash and cash equivalents, end of period 65,073 75,735
Backlog, end of period 451,435 443,271
Total debt, end of period 595,096 462,516
1 Refer to the "Non-GAAP
Financial Measures" section
below for discussion of the
calculation of these non-
GAAP financial measures.
EXECUTIVE COMMENTARY - RANDY J. MARTINEZ, INTERIM PRESIDENT AND CHIEF EXECUTIVE OFFICER
"During my first two months as MTS' Interim President and Chief Executive Officer, I have seen firsthand the critical role we play in building global infrastructure, supporting decarbonization efforts, and driving success for our customers. I am inspired by how our employees have continued this vital work during the last quarter despite the global pandemic.
Throughout the third quarter, we acted decisively to mitigate COVID-19's impact on our business. We strengthened our financial position through restructuring and cost reduction initiatives, temporary curtailments in cash compensation for our Board of Directors and senior executives, and the suspension of dividend payments. More recently, we amended our revolving credit facility to maximize our liquidity position under our current capital structure. Importantly, we executed these initiatives while maintaining a safe work environment for our employees and business continuity for our customers.
We experienced softer demand as the pandemic forced many customers to temporarily shut down their operations and delay orders. This was partially offset by top-line contributions from our recent acquisition of the R&D entities in Denmark, which have shown strong momentum since the transaction was completed early in the second quarter of fiscal year 2020.
As we look to the fourth quarter, we expect to sustain our performance sequentially while recognizing improvements in our order profile. Despite continuing challenges posed by the pandemic, we remain confident that our differentiated technology, industry-leading engineering, deep customer relationships, global footprint and strong talent pool will drive future growth.
Our top priority remains protecting the well-being of our employees while providing a high-quality service to our valued customers. I am committed to executing on our strategic initiatives and returning MTS to strong profitability."
HIGHLIGHTS FOR THE 2020 THIRD FISCAL QUARTER
Revenue
Revenue was $196.2 million, down 15.5% compared to the same prior year period, due to declines in Test & Simulation and Sensors. Both businesses were negatively impacted by COVID-19 due to the closure of customer sites, travel restrictions and delayed customer spending. Test & Simulation revenue decreased primarily due to a decline in volume from softness in our ground vehicles and materials sectors, coupled with lower service volume. The decline was partially offset by top-line contributions from the acquisition of the R&D entities in Denmark (R&D) of $14.1 million, which was completed early in the second quarter of fiscal year 2020. Sensors revenue declined due to softness in all sectors except our test sector, which included the addition of Endevco, which closed during the fourth quarter of fiscal year 2019, and continued U.S. Department of Defense volume growth. Importantly, we had no material cancellations of orders or backlog in the third quarter.
Orders
Test & Simulation orders for the quarter were $80.9 million, down 22.1% compared to the same prior year period primarily driven by lower orders in our ground vehicles sector and lower services orders reflecting the global impact of COVID-19. The decrease was partly offset by the addition of wind energy orders from the acquisition of R&D.
Sensors orders for the quarter were $70.3 million, down 8.5% compared to the same prior year period primarily driven by lower orders in our position, industrial and systems sectors reflecting the global impact of COVID-19. The decrease was partially offset by growth in our test sector primarily driven by additional funding associated with the U.S. Department of Defense and the addition of orders from the acquisition of Endevco.
Backlog
Backlog remained strong at $451.4 million, which reflects an increase of 1.8% compared to the same prior year period. Sequentially, from the second quarter of fiscal year 2020, backlog was down 9.7% driven by revenue realized during the third quarter outpacing order bookings. Ending backlog for Test & Simulation and Sensors was $373.3 million and $78.1 million, respectively.
Net Income and Diluted Earnings Per Share
GAAP diluted earnings per share was $0.23 compared to $0.70 in the same prior year period on net income of $4.4 million and $13.6 million, respectively. The $0.47 decrease was primarily driven by a decline in gross profit as the result of lower revenue volume in both businesses reflecting the impact of COVID-19. Additionally, we had higher Test & Simulation restructuring costs from actions taken in the second and third quarters of fiscal year 2020 to manage and reduce operating costs, higher interest expense on increased debt levels, the R&D contingent consideration fair value adjustment and higher acquisition-related costs due to the R&D and Endevco acquisitions. The decline was partially offset by lower compensation expense in both businesses, cost containment measures and a reduction in the effective tax rate which includes $0.08 of discrete tax benefits in the third quarter of fiscal year 2020.
Third quarter of fiscal year 2020 and 2019 results include $0.21 and $0.01, respectively, of non-recurring costs associated with restructuring actions taken in fiscal year 2020, the R&D contingent consideration fair value adjustment, acquisition-related expenses, and E2M and Endevco acquisition inventory fair value adjustments. R&D was acquired early in the second quarter of fiscal year 2020, and E2M and Endevco were acquired in the first and fourth quarters of fiscal year 2019, respectively. Adjusting for these items, adjusted diluted earnings per share was $0.44 for the third quarter of fiscal 2020, and $0.71 for the same period in the prior year. A reconciliation of adjusted diluted earnings per share, a non-GAAP financial measure, to diluted earnings per share, the most directly comparable GAAP financial measure, is provided in Exhibits B and C of this earnings release.
Our diluted earnings per share and adjusted diluted earnings per share include the amortization of purchased intangible assets of $0.26 and $0.18 for the third quarter of fiscal year 2020 and 2019, respectively. We incurred pre-tax amortization expense of $6.3 million ($5.0 million post-tax) and $4.4 million ($3.5 million post-tax) for the third quarter of fiscal year 2020 and 2019, respectively, in relation to companies that we have acquired.
Adjusted EBITDA
Adjusted EBITDA declined to $28.8 million in the third quarter of fiscal year 2020, down 18.5% compared to the same prior year period. The decrease was primarily driven by a decline in gross profit from lower revenue in both businesses reflecting the impact of COVID-19, partially offset by lower compensation expense and cost containment measures. A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable GAAP financial measure, is provided in Exhibit D of this earnings release.
Coronavirus 2019 (COVID-19) Pandemic Update
The COVID-19 pandemic continues to create significant volatility, uncertainty and economic disruption resulting in an adverse impact on all facets of our business. We have taken swift action to mitigate impact and solidify our financial position. We are currently operating in all markets we serve as permitted, and our production capacity continues to recover as jurisdictions ease work restrictions throughout the world. However, restrictions on our employees' ability to access our customers, temporary closures of customer facilities and delays in customer spending have negatively impacted our sales and operating results for the third quarter of fiscal year 2020. Given the evolving nature of the pandemic, at this time, we cannot forecast with reasonable accuracy the pace of recovery across our end markets during the fourth quarter.
Cost Reductions and Restructuring Actions
As mentioned in our second quarter earnings release, we have taken swift cost reduction actions to provide an increased level of flexibility during these challenging times. We previously stated that we expect to realize at a minimum $10.0 million in cost savings from these actions in the second half of fiscal year 2020 and we have met or slightly exceeded the savings target for the third quarter of fiscal year 2020. We expect to see at least the same amount for the fourth quarter of fiscal year 2020 allowing us to achieve or slightly exceed our overall target of $10.0 million in cost savings.
Balance Sheet and Liquidity
During the quarter, our total debt balance decreased $5.5 million to $595.1 million as we continue to pay-down our outstanding debt balance. We ended the quarter with $65.1 million of cash on the balance sheet, leading to a net debt balance of $530.0 million. The ratio of interest-bearing debt to Adjusted EBITDA and the ratio of net interest-bearing debt to Adjusted EBITDA remain in full compliance with the debt covenant levels specified in our debt agreements and debt maturities not occurring until July 2023 and August 2027. On July 30, 2020, subsequent to quarter end, we amended our revolving credit facility to provide operational and financial flexibility as we navigate COVID-19 and continued macroeconomic uncertainty.
"Our recently amended credit facility has allowed us to nearly double our total liquidity position to approximately $180 million before considering any letters of credit," said Brian Ross, Executive Vice President and Chief Financial Officer. "Our financial position is sound, further supported by free cash flow generation during the third quarter. We remain focused on our financial priorities, including maximizing liquidity and effectively managing our cost infrastructure, and we will continue to engage our lenders to support our financial flexibility to navigate the near-term environment and position us to return to growth as the market recovery takes hold."
THIRD QUARTER CONFERENCE CALL
As announced on July 20, 2020, a conference call will be held on August 4, 2020 (tomorrow), at 11:00 a.m. ET (10:00 a.m. CT). Randy J. Martinez, Interim President and Chief Executive Officer, and Brian T. Ross, Executive Vice President and Chief Financial Officer, will host the call, which will include a question and answer session after prepared remarks.
Call toll free +1-800-353-6461 (international toll +1-334-323-0501) and reference the conference pass code 8588209. The conference call replay will be available at 1:00 p.m. ET following the call until 1:00 p.m. ET, August 11, 2020. Call toll free +1-888-203-1112 and reference the conference pass code 8588209.
A transcript of the call can also be accessed from the MTS website at http://investor.mts.com/events-and-presentations/presentations beginning on August 5, 2020.
ABOUT MTS SYSTEMS CORPORATION
MTS Systems Corporation's testing and simulation hardware, software and service solutions help customers accelerate and improve their design, development and manufacturing processes and are used for determining the mechanical behavior of materials, products and structures. MTS' high-performance sensors provide measurements of vibration, pressure, position, force and sound in a variety of applications. MTS had 3,500 employees as of September 28, 2019 and revenue of $893 million for the fiscal year ended September 28, 2019. Additional information on MTS can be found at www.mts.com.
NON-GAAP FINANCIAL MEASURES
We believe that disclosing adjusted diluted earnings per share, which is diluted earnings per share excluding the impact from restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment is useful to investors as a measure of operating performance. We use this as one measure to monitor and evaluate operating performance. Adjusted diluted earnings per share is a financial measure that does not reflect United States Generally Accepted Accounting Principles (GAAP). We calculate this measure by adding back the after-tax effect of the restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment to net income and dividing the result by the diluted weighted average shares outstanding.
We believe that disclosing earnings before interest, taxes, depreciation and amortization (EBITDA), EBITDA excluding the impact from stock-based compensation, restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment (Adjusted EBITDA) and Adjusted EBITDA divided by revenue (Adjusted EBITDA margin) are useful to investors as a measure of leverage and operating performance. We use these measures to monitor and evaluate leverage and operating performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are financial measures that do not reflect GAAP. We calculate EBITDA by adding back interest, taxes, depreciation and amortization expense to net income. Adjusted EBITDA is calculated by adding back stock-based compensation, restructuring expenses, acquisition-related expenses and the acquisition inventory fair value adjustment to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenue.
We believe that disclosing free cash flow is useful to investors as a measure of operating performance. We use this measure as an indicator of our strength and ability to generate cash. Free cash flow is a financial measure that does not reflect GAAP. We calculate free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment and businesses, net of cash acquired, plus cash proceeds from sales of property and equipment.
Investors should consider these non-GAAP financial measures in addition to, not as a substitute for or better than, financial measures prepared in accordance with GAAP. Reconciliations of the components of these measures to the most directly comparable GAAP financial measures are included in Exhibits B, C, D and E of this earnings release.
FORWARD-LOOKING STATEMENTS
This earnings release contains "forward-looking statements" made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from historical results and those presently anticipated or projected. Words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions identify forward-looking statements in this earnings release. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, statements about the opportunities and outlook for our Sensors and Test & Simulation sectors, statements about the impact of COVID-19 and related economic uncertainty, and other statements that are not historical facts. These statements are based on our current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. Risks, uncertainties and assumptions that could cause our actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, the currently-unknown impact of COVID-19 and related economic uncertainty and those described in the "Risk Factors" section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") and updated in any subsequent Quarterly Reports on Form 10-Q and other filings with the SEC. The reports referenced above are available on our website at www.mts.com or on the SEC's website at www.sec.gov. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances.
MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands, except per share data)
Three Months Ended
Nine Months Ended
June 27, June 29, June 27, June 29,
2020 2019 2020 2019
---
Revenue
Product $
175,223 $
205,528 $
537,304 $
587,297
Service 21,002 26,681 76,227 81,139
Total revenue 196,225 232,209 613,531 668,436
Cost of sales
Product 116,491 130,514 349,336 368,260
Service 14,239 16,592 50,850 49,418
Total cost of sales 130,730 147,106 400,186 417,678
Gross profit 65,495 85,103 213,345 250,758
Gross margin 33.4
% 36.6
% 34.8
% 37.5
%
Operating expenses
Selling and marketing 26,857 33,321 89,707 98,805
General and administrative 19,692 20,621 67,382 63,804
Research and development 6,303 8,160 20,485 23,008
Total operating expenses 52,852 62,102 177,574 185,617
Income from operations 12,643 23,001 35,771 65,141
Operating margin 6.4
% 9.9
% 5.8
% 9.7
%
Interest income (expense), net (8,846) (6,687) (25,975) (20,873)
Other income (expense), net (446) (124) (1,059) 195
Income before income taxes 3,351 16,190 8,737 44,463
Income tax provision (benefit) (1,038) 2,605 113 6,217
Net income $
4,389 $
13,585 $
8,624 $
38,246
Earnings per share
Basic
Earnings per share $
0.23 $
0.70 $
0.45 $
1.99
Weighted average common shares outstanding 19,229 19,297 19,189 19,255
Diluted
Earnings per share $
0.23 $
0.70 $
0.45 $
1.97
Weighted average common shares outstanding 19,315 19,520 19,349 19,436
Dividends declared per share
$ $
0.30 $
0.60 $
0.90
MTS SYSTEMS CORPORATION
Condensed Consolidated Balance Sheets
(unaudited - in thousands)
June 27, September 28,
2020 2019
---
ASSETS
Current assets
Cash and cash equivalents $
65,073 $
57,937
Accounts receivable, net 118,686 121,260
Unbilled accounts receivable, net 91,787 80,331
Inventories, net 177,210 167,199
Prepaid expenses and other current assets 30,363 23,761
Total current assets 483,119 450,488
Property and equipment, net 100,160 101,083
Goodwill 465,978 429,039
Intangible assets, net 342,901 306,585
Other long-term assets 30,962 10,782
Total assets $
1,423,120 $
1,297,977
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $
27,000
$
Current maturities of long-term debt, net 2,830 27,969
Accounts payable 51,639 46,849
Advance payments from customers 64,980 70,520
Other accrued liabilities 95,935 106,238
Total current liabilities 242,384 251,576
Long-term debt, less current maturities, net 565,266 484,648
Other long-term liabilities 126,614 77,694
Total liabilities 934,264 813,918
Shareholders' equity
Common stock, $0.25 par; 64,000 shares authorized:
19,220 and 19,124 shares issued and outstanding as
of June 27, 2020 and September 28, 2019, respectively 4,805 4,781
Additional paid-in capital 187,128 182,422
Retained earnings 312,444 315,329
Accumulated other comprehensive income (loss) (15,521) (18,473)
Total shareholders' equity 488,856 484,059
Total liabilities and shareholders' equity $
1,423,120 $
1,297,977
MTS SYSTEMS CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)
Three Months Ended
Nine Months Ended
June 27, June 29, June 27, June 29,
2020 2019 2020 2019
---
Cash Flows from Operating Activities
Net income $
4,389 $
13,585 $
8,624 $
38,246
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Stock-based compensation 119 2,609 5,214 7,298
Fair value adjustment to acquired inventory - 157 1,140 1,141
Depreciation 5,218 5,236 17,287 15,485
Amortization 6,288 4,449 17,343 12,668
Accretion of contingent consideration 439 895
Contingent consideration fair value adjustment 1,301 1,301
(Gain) loss on sale or disposal of property and equipment 1,277 42 2,327 552
Amortization of debt issuance costs 776 708 2,220 2,807
Deferred income taxes 825 (187) 1,718 (1,430)
Other 366 370 128 1,457
Changes in operating assets and liabilities (4,999) (7,668) (44,777) (28,254)
Net Cash Provided by (Used in) Operating Activities 15,999 19,301 13,420 49,970
Cash Flows from Investing Activities
Purchases of property and equipment (4,863) (8,028) (21,144) (17,377)
Proceeds from sale of property and equipment - 10
Purchases of business, net of acquired cash (1,164) (1,700) (49,268) (83,526)
Other 87 87 (285)
Net Cash Provided by (Used in) Investing Activities (5,940) (9,728) (70,325) (101,178)
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt - 58,576 80,391
(Payments on) proceeds from financing arrangements, net (6,615) (2,438) 22,168 (9,221)
Cash dividends (5,719) (5,375) (17,205) (16,099)
Proceeds from exercise of stock options and employee stock purchase plan (1) 996 630 1,697
Payments to purchase and retire common stock (303) (986) (1,176) (1,384)
Net Cash Provided by (Used in) Financing Activities (12,638) (7,803) 62,993 55,384
Effect of Exchange Rate Changes on Cash and Cash Equivalents 1,070 (157) 1,048 (245)
Increase (decrease) in cash and cash equivalents during the period (1,509) 1,613 7,136 3,931
Cash and cash equivalents balance, beginning of period 66,582 74,122 57,937 71,804
Cash and cash equivalents balance, end of period $
65,073 $
75,735 $
65,073 $
75,735
Exhibit A
MTS SYSTEMS CORPORATION
Segment Financial Information
(unaudited - in thousands)
Three Months Ended
Nine Months Ended
June 27, June 29, June 27, June 29,
2020 2019 2020 2019
---
Test & Simulation Segment
---
Revenue $
116,404 $
148,328 $
362,631 $
424,920
Cost of sales 87,629 104,053 263,777 293,810
Gross profit 28,775 44,275 98,854 131,110
Gross margin 24.7
% 29.8
% 27.3
% 30.9
%
Operating expenses 29,067 32,851 92,955 99,671
Income (loss) from operations $
(292) $
11,424 $
5,899 $
31,439
Sensors Segment
---
Revenue $
80,222 $
84,231 $
251,955 $
244,556
Cost of sales 43,502 43,424 137,463 124,916
Gross profit 36,720 40,807 114,492 119,640
Gross margin 45.8
% 48.4
% 45.4
% 48.9
%
Operating expenses 23,785 29,251 84,619 85,946
Income from operations $
12,935 $
11,556 $
29,873 $
33,694
Intersegment Eliminations
---
Revenue $
(401) $
(350) $
(1,055) $
(1,040)
Cost of sales (401) (371) (1,054) (1,048)
Gross profit - 21 (1) 8
Income (loss) from operations
$ $
21 $
(1) $
8
Total Company
---
Revenue $
196,225 $
232,209 $
613,531 $
668,436
Cost of sales 130,730 147,106 400,186 417,678
Gross profit 65,495 85,103 213,345 250,758
Gross margin 33.4
% 36.6
% 34.8
% 37.5
%
Operating expenses 52,852 62,102 177,574 185,617
Income from operations $
12,643 $
23,001 $
35,771 $
65,141
Exhibit B
MTS SYSTEMS CORPORATION
Reconciliation of Adjusted Diluted Earnings Per Share
(unaudited - in thousands, except per share data)
Three Months Ended
June 27, 2020
June 29, 2019
Pre-Tax
Tax
Net Pre-Tax
Tax
Net
---
Net income $
3,351 $
(1,038) $
4,389 $
16,190 $
2,605 $
13,585
Restructuring expenses 1 2,745 615 2,130
Acquisition-related expenses (1) 1,243 268 975 98 21 77
Acquisition inventory fair value adjustment (1) - 157 24 133
Contingent consideration fair value adjustment (1) 1,301 286 1,015
Adjusted net income 2 $
8,640 $
131 $
8,509 $
16,445 $
2,650 $
13,795
Weighted average diluted common shares outstanding 19,315 19,520
Diluted earnings per share $
0.17 $
(0.06) $
0.23 $
0.84 $
0.14 $
0.70
Impact of restructuring expenses 0.14 0.03 0.11
Impact of acquisition-related expenses 0.07 0.02 0.05
Impact of acquisition inventory fair value adjustment - 0.01 0.01
Impact of contingent consideration fair value adjustment 0.07 0.02 0.05
Adjusted diluted earnings per share(2) $
0.45 $
0.01 $
0.44 $
0.85 $
0.14 $
0.71
1
In determining the tax impact of restructuring expenses, acquisition-related expenses, acquisition inventory fair value adjustment and contingent consideration fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.
2
Denotes non-GAAP financial measure.
Exhibit C
MTS SYSTEMS CORPORATION
Reconciliation of Adjusted Diluted Earnings Per Share
(unaudited - in thousands, except per share data)
Nine Months Ended
June 27, 2020
June 29, 2019
Pre-Tax
Tax
Net Pre-Tax
Tax
Net
---
Net income $
8,737 $
113 $
8,624 $
44,463 $
6,217 $
38,246
Restructuring expenses 1 8,883 2,403 6,480 130 33 97
Acquisition-related expenses (1) 4,867 1,043 3,824 1,133 238 895
Acquisition inventory fair value adjustment (1) 1,140 239 901 1,141 172 969
Contingent consideration fair value adjustment (1) 1,301 286 1,015
Adjusted net income 2 $
24,928 $
4,084 $
20,844 $
46,867 $
6,660 $
40,207
Weighted average diluted common shares outstanding 19,349 19,436
Diluted earnings per share $
0.45
$ $
0.45 $
2.29 $
0.32 $
1.97
Impact of restructuring expenses 0.46 0.13 0.33
Impact of acquisition-related expenses 0.25 0.05 0.20 0.06 0.01 0.05
Impact of acquisition inventory fair value adjustment 0.06 0.01 0.05 0.06 0.01 0.05
Impact of contingent consideration fair value adjustment 0.07 0.02 0.05
Adjusted diluted earnings per share(2) $
1.29 $
0.21 $
1.08 $
2.41 $
0.34 $
2.07
1
In determining the tax impact of restructuring expenses, acquisition-related expenses, acquisition inventory fair value adjustment and contingent consideration fair value adjustment, we applied the statutory rate in effect for each jurisdiction where the expenses were incurred.
2
Denotes non-GAAP financial measure.
Exhibit D
MTS SYSTEMS CORPORATION
Reconciliation of EBITDA and Adjusted EBITDA
(unaudited - in thousands)
Three Months Ended
Nine Months Ended
June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019
---
Net income $
4,389 $
13,585 $
8,624 $
38,246
Net income margin 2.2 5.9 1.4 5.7
%
%
%
%
Income tax provision (1,038) 2,605 113 6,217
Interest expense, net 8,846 6,687 25,975 20,873
Depreciation 5,218 5,236 17,287 15,485
Amortization 6,288 4,449 17,343 12,668
EBITDA (1) 23,703 32,562 69,342 93,489
Stock-based compensation 119 2,609 5,214 7,298
Restructuring expenses (2) 2,932 9,070 130
Acquisition-related expenses (2) 745 29 3,887 955
Acquisition inventory fair value adjustment - 157 1,140 1,141
Contingent consideration fair value adjustment 1,301 1,301
Adjusted EBITDA (1) $
28,800 $
35,357 $
89,954 $
103,013
Adjusted EBITDA margin 1,3 14.7 15.2 14.7
%
%
%
% 15.4
1
Denotes non-GAAP financial measure.
2
Restructuring and acquisition-related expenses were adjusted to exclude stock-based compensation that is otherwise included in the stock-based compensation line and interest expense that is otherwise included in the interest expense, net line.
3
Adjusted EBITDA was divided by revenue when calculating the Adjusted EBITDA margin.
Exhibit E
MTS SYSTEMS CORPORATION
Reconciliation of Free Cash Flow
(unaudited - in thousands)
Three Months Ended
Nine Months Ended
June 27, June 29, June 27, June 29,
2020 2019 2020 2019
---
Net Cash Provided by (Used in) Operating Activities $
15,999 $
19,301 $
13,420 $
49,970
Purchases of property and equipment (4,863) (8,028) (21,144) (17,377)
Proceeds from sale of property and equipment - 10
Free cash flow(1) $
11,136 $
11,273 $
(7,724) $
32,603
1
Denotes non-GAAP financial measure.
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SOURCE MTS Systems Corporation
