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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________
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COMMISSION FILE NUMBER 0-2382
MTS SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 952-937-4000 41-0908057
(STATE OR OTHER JURISDICTION OF (TELEPHONE NUMBER (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) OF REGISTRANT IDENTIFICATION NO.)
INCLUDING AREA CODE)
14000 TECHNOLOGY DRIVE, EDEN PRAIRIE, MINNESOTA 55344-9763
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK (PAR VALUE OF 25(CENTS) PER SHARE)
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.
__X__YES _____ 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. ( )
AS OF DECEMBER 4, 2000, 20,722,568 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-AFFILIATES WAS $81,271,700.
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DOCUMENTS INCORPORATED BY REFERENCE
ANNUAL REPORT TO SHAREHOLDERS FOR FISCAL YEAR ENDED SEPTEMBER 30, 2000 - PARTS
I, II AND IV.
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS, STATEMENT DATED PRIOR TO
JANUARY 30, 2001 - 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") is a technology-based, market-driven company providing hardware,
software, and engineering services to researchers, designers and manufacturers.
MTS bases its business on a set of building-block technologies and business
processes. Technologies include 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 a
test or automation system to the customer's needs and to analyze results.
Business processes include project and product styles of operations on a
worldwide basis. In combination, they offer solutions to customers in a variety
of markets.
In the Mechanical Testing and Simulation segment, customers use the Company's
products and services in research, product development and quality control to
determine the mechanical properties and performance of materials, products and
structures. Many of the Company's products and services support the customers'
mechanical design automation processes. In the Factory Automation segment,
customers use the Company's measurement and control instrumentation to measure
process variables and to automate production processes.
CUSTOMERS AND PRODUCTS BY BUSINESS SEGMENT
The Company's operations are organized into two reportable business segments: 1)
Mechanical Testing and Simulation (MT&S), and 2) Factory Automation (FA). The
operational alignment of the segments 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 Reportable Segment: Customers in this segment
use MTS's systems and software for research, product development and quality
control in the design and manufacture of materials, products and structures.
Customer industries in this segment include:
AIRCRAFT AND AEROSPACE VEHICLE MANUFACTURERS AND THEIR SUPPLIERS: These
customers use the Company's systems and software for full-scale structural tests
on complete vehicles and principal subsystems such as landing gear.
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In the aircraft industry, the Company's customers include manufacturers of
commercial, military and general aviation planes and their suppliers, such as
engine manufacturers.
The space vehicle industry utilizes the Company's systems and software for such
applications as solid fuel development and heat shield studies.
Both aircraft and space vehicle manufacturers and their suppliers use the
Company's systems and software to perform research on new materials and to
control quality in the manufacturing of materials.
CIVIL ENGINEERING: This market is comprised of university and government
laboratories, and construction and mineral/petroleum production companies.
Systems sold in this market include seismic (earthquake) simulators, civil
construction component (e.g., beam) testing systems, pavement material testing
systems, and specialized systems for rock and soil studies in construction and
mineral/petroleum production.
CONSUMER AND BIOMECHANICAL PRODUCTS/MATERIAL PRODUCERS: Customers use the
Company's electromechanical and servohydraulic material testing systems in
research, product development and extensively for quality control during
production. In addition, customers use the Company's nanoindentation systems to
test and measure mechanical properties of products where microscopic precision
is required.
Typical consumer products are made of textiles, paper products and plastic films
of many types. Biomechanical products include implants, prostheses and other
medical and dental devices and materials. Material producers include metal,
ceramic, composite, paper and plastic manufacturers.
GROUND VEHICLE INDUSTRY: This market consists of automobile, truck, motorcycle
and off-road vehicle manufacturers and their suppliers. This market is the
largest within the MT&S sector.
Applications of the Company's systems and software include the design and
production testing of engines and drivetrains, suspension and steering
components, body and chassis, tires and wheels, and fuel storage and exhaust
components. Vehicle manufacturers strive to improve performance, durability and
safety while eliminating noise and vibration from their products. Customers also
integrate MTS modeling software and physical testing systems to accelerate
prototype design and decrease manufacturing costs of their products and
components.
ADVANCED SYSTEMS: The Company also offers highly customized systems for
simulation and testing through its Advanced Engineering Solutions Division
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(AESD). These systems frequently embody technology, which is new to the
application. Customers of AESD come from all industries served by the MT&S
sector - aerospace and advanced materials, civil engineering, and ground
vehicles - as well as customers from other industries interested in the
development of new manufacturing technologies and systems such as welding and
material processing.
MT&S sector accounted for 77% of revenue in 2000, 80% of revenue in 1999, and
79% of revenue in 1998. It represents the oldest and is the principal market for
the Company's technology.
Factory Automation Reportable Segment: FA customers use MTS products in discrete
part manufacturing and chemical process industries. Products in this segment
include:
DISPLACEMENT POSITION AND LIQUID-LEVEL SENSORS BASED ON MAGNETOSTRICTIVE
TECHNOLOGY. Displacement sensors accurately measure position up to 25 feet. They
are used where accurate positioning and continuous control are critical, such as
in discrete (piece part) manufacturing machinery, mobile equipment, process
control elements and continuous measurement devices. Major applications include
injection molding machines, servo-hydraulic cylinders, and presses of all types,
sawmills, logging and other mobile machinery and valve or flow control.
Displacement sensors are also used in high volume applications requiring low
cost position feedback. MTS builds a version of its technology in various
lengths and configurations, but at very high rates affording on-board low cost
solutions to industries such as automotive, appliance, medical, agricultural,
marine, aeronautic and other non-manufacturing markets.
Liquid level sensors accurately measure the level of liquids in tanks and other
vessels up to 60 feet. These sensors are marketed to control continuous
processes in chemical, pharmaceutical, bio-technology and other related markets.
The need for highly reliable accurate measurement of one or more fluid levels is
common in most of these applications. MTS markets liquid level sensors to both
end users, such as chemical producing companies, and to original equipment
manufacturers and private label companies who build level measurement or leak
detection into their control systems or as accessories for remote indication and
control devices.
SERVO MOTORS, AMPLIFIERS AND CONTROLLERS: Customers use high-performance
brushless servo motors and amplifiers for challenging factory automation
applications in a wide range of industries, including machine tools, fabrication
and packaging. Specialized plug-in amplifiers are used in light duty
applications such as the semiconductor and textile industries. The Company's
controllers are used for precise control of a wide variety of applications
ranging from simple applications requiring only one axis of control to
high-speed, complex operations requiring up to 28 axes of control. These
combined product lines address the need for high performance systems and are
used primarily by original equipment manufacturers and large end users.
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TITANIUM PRODUCTS: The Company, through its wholly owned subsidiary, AeroMet
Corporation has developed an innovative laser direct metal deposition process
for manufacturing titanium parts. The process uses a laser to fuse titanium
powder, layer upon layer, into solid structures. This computer driven process
significantly reduces the time required to produce large complex parts.
The FA sector accounted for 23% of revenue in 2000, 20% of revenue in 1999, and
21% of revenue in 1998.
COMMON TECHNOLOGIES
MTS' systems and products in all segments are constructed using employees'
application engineering know-how with common technology building block
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 products and 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. 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 in the MT&S sector are in some cases
undertaken on "cost-plus-fixed-fee" contract basis.
2000 PRODUCT DEVELOPMENT HIGHLIGHTS
The Company funds new application and product development within its market
sectors. Highlights of product development undertaken or completed in 2000
include:
Mechanical Testing and Simulation Reportable Segment
o The Company introduced the FlexTest GT and TestStar IIm control products.
These controllers employ distributed processors and digital transducer
conditioners and are configurable for multiple channels and stations. The
vehicle, material, & aerospace markets all take advantage of its
flexibility to perform multiple types of tests required for product
development.
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o The Company introduced AeroPro for Data Acquisition. The software is to be
used by Aerospace Structural Test laboratories and other customers with
large channel count needs. The software incorporates a modern explorer-like
user interface, has an open architecture and has the capability to
integrate data from our load controllers. The software supports multiple
hardware platforms and is designed to greatly improve data display and data
handling capabilities.
o The Company introduced the SWIFT Ultra product. This is a new, smaller
configuration of the SWIFT wheel force transducer originally introduced in
1998. The SWIFT Ultra product is designed for lighter weight vehicles and
complements our existing Passenger Car SWIFT and Light Truck SWIFT
versions. The system's primary purpose is to collect force and moment data
in vehicle data acquisitions, and develop simulations in the laboratory.
This technology greatly simplifies and compresses development cycles for
new vehicles and associated products.
o The Company introduced the Jury Evaluation software product. This software
is used to evaluate product sound quality based on human responses and is
key to our customers' strategy to "listen as their customers listen" to
engineer their products to be best in class.
o The Company introduced a new long stoke passenger car road simulator to
simulate both rough road durability and maneuvering events to help develop
new body structures. This simulator makes use of MTS's newly developed Six
Degree of Freedom technology.
Factory Automation Reportable Segment
o The Company introduced a new family of intelligent digital servo amplifiers
for use in both the general factory automation and semi conductor
industries.
o The company introduced a high current (700 volt) amplifier to the Magnetic
Resonance Imaging market. This product facilitates enhanced imaging
resolution or increased imaging speed.
o The Company developed very long sensors, in excess of 60 feet active
length, with multiple measurement points (up to 30) for monitoring soil and
rock movement in slide prone areas of Japan.
o The Company developed an integrated electronics, environmental housing and
sensor product that is the first to use an overmolding process. This sensor
is designed to address high volume commercial applications. It uses an
automatically produced sensor cartridge and is targeted for Commercial
customers in the medical, HVAC, off-road machinery, and appliance markets.
o The Company developed a modular Liquid Level Product line, the M-Series, to
replace existing models and provide common design elements across the
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line. The M-Series reduces time to market for new models by eliminating
redesign and reduces costs across the line by increasing common module
production volumes.
o The Company developed enhanced Profibus models to address a much broader
range of challenging applications. This revamped software is housed within
the sensor, manages large numbers of magnets, and provides robust
measurement as well as extensive diagnostic functionality during the
measurement cycle. The plastics injection molding market is the first
target for this enhanced product.
o The Company developed a new E-Series product line for machine control that
provides the features of Magnetostrictive measurement at the lower end of
the pricing spectrum.
CHARACTERISTICS OF SALES
The Company's systems and products are sold and delivered throughout the world,
and its customer base covers a broad spectrum of industries, government
agencies, institutions, applications and geographic locations. As such, MTS is
not dependent upon any single customer for its business.
MT&S systems range in price from less than $20,000 to over $30 million. Large,
individual, fixed-price orders, generally considered to be over $10 million,
although important to the Company's image and technical advancement, can 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 some
require extensive technical communication 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.
FA products are sold in quantity at unit prices ranging from $500 to $10,000.
Delivery varies from several days to several months.
Approximately 50% of revenue in fiscal 2000, 51% of revenue in fiscal 1999, and
55% of revenue in fiscal 1998 was from domestic customers. The balance of the
revenue, some of which was sold in currencies other than the U.S. dollar, was to
customers located outside the United States--mainly in Europe, Asia-Pacific,
Latin America and Canada. The Company's foreign operations and foreign revenues
may be affected by local political conditions, export licensing problems and/or
currency restrictions.
Sales Channels: MTS markets its products using a number of sales channels. The
Company sells its MT&S equipment through an employee sales network, independent
sales representatives and a direct mail (catalog) operation. Sales
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personnel are generally graduate engineers or highly skilled technicians and are
specially trained to sell MT&S products and services. Employee salespersons are
compensated with salary and sales incentives, and independent representatives
are paid a commission.
A list of major domestic and international offices for the Company's MT&S
reportable segment follows:
Domestic offices:
Akron Dayton Pittsburgh
Austin Denver Raleigh
Baltimore Detroit Rockford
Boston Los Angeles San Francisco
Charlotte Minneapolis Seattle
Chicago Milwaukee Washington, D.C
Cincinnati Newark
Dallas Philadelphia
International offices:
Beijing and other cities, Paris, France
Peoples Republic of China Seoul, South Korea
Berlin and other cities, Singapore
Germany Tokyo and other cities, Japan
Gloucester, United Kingdom Torino, Italy
Gothenburg, Sweden
In addition, MT&S works with sales and service representative organizations in
nearly all industrialized countries of the world and in the developing countries
of Latin America, Asia, Africa and the Middle East.
The Company offers a mail-order catalog of material testing 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 FA segment sells its products through sales channels separate from the MT&S
segment. A network of employees, direct sales, external domestic distributors,
representatives and system houses market the products of these divisions.
International revenue currently accounts for 44% of this segment's volume.
Efforts continue to expand sales channels in international markets.
International Operations and Export Sales: The sections entitled Geographic
Analysis of New Orders and Business Segment Information on pages 15 and 26 of
the Company's 2000 Annual Report to Shareholders, which sections are
incorporated by reference herein, contain information regarding the Company's
operations by geographic area.
7
Export Licensing: The Company's foreign shipments in fiscal 2000, 1999, and 1998
included sales to Asia-Pacific, Europe and other regions that may require the
Company to obtain export permission from the U.S. government. The Company does
not undertake manufacturing on custom systems or projects until it is assured
that permission 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, the U.S. government still maintains multilateral controls in agreement
with allies and unilateral controls based on U.S. initiatives and foreign policy
that could 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 $163.0 million at September 30, 2000, $146.8 million at September 30,
1999, and $187.2 million at September 30, 1998. The Company believes that
approximately $155.0 million of the backlog at September 30, 2000 will become
revenue during fiscal 2001. Delays may occur due to technical difficulties,
export licensing approval or the customer's preparation of the installation
site. Any such delay can affect the period when backlog is recognized as
revenue.
COMPETITION
In the MT&S segment, customers may choose to buy equipment from the Company or
from competitors, principally: Instron (U.S.-based), Interlachen (U.S.), AVL
(Austria), Zwick (Germany), Saganomiya and Shimadzu (Japan). There are also
smaller local competitors in most major countries.
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 FA segment, the Company competes directly with small to medium-sized
specialty suppliers and also with divisions of the large control system
companies such as Kollmorgen, Emerson Electric, Indramat (Germany) and Fanuc
(Japan).
MANUFACTURING AND ENGINEERING
The Company conducted a significant portion of its fiscal 2000 MT&S
manufacturing and engineering activities in Minneapolis. Certain engineering,
project management, final system assembly and quality testing may be done in
Berlin, Germany, and Tokyo, Japan. Electromechanical material testing systems
8
are assembled in the Raleigh, NC, facility. The Company's MTS-Powertrain
Division engineers and assembles dynamometer control systems and provides
related services from Ann Arbor, MI. Manufacturing and engineering activities
for the FA reportable segment occur in Raleigh, NC, New Ulm, MN, Horsham, PA,
Ludenscheid, Freiburg, and Stralsund, Germany, and at the Company's
majority-owned subsidiary in Nagoya, Japan.
PATENTS AND TRADEMARKS
The Company holds a number of patents, patent applications, licenses, trademarks
and copyrights that 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.
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 $24.6, $27.0, and $24.3 million for fiscal
years 2000, 1999, and 1998, respectively. Additionally, the Company also
undertakes "first of their kind" high-technology, customer-funded contracts
which contain considerable technical pioneering. The combination of internally
sponsored product development and system or application innovation on customer
contracts approaches 10% of annual sales volume.
EMPLOYEES
MTS employed 2,350 persons as of September 30, 2000, including 446 employees in
Europe, 61 in Japan, 8 in China, 4 in Canada, 12 in Korea, and 3 in Singapore.
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 and component parts purchased from vendors. The relationship which the
Company promotes with its vendors is partnership based with an emphasis on
continuous improvement. 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 an early date, can
change the expected profitability of any sale. The Company believes that such
9
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.
BUSINESS SYSTEMS DEVELOPMENT
The Company undertook the development and deployment of an enterprise-wide
financial and business operations software system in 1997. The company completed
the first phase of implementation in early 1999, with subsequent phases to
follow. This system is expected to improve business processing and to provide
software processing capability beyond the end of the century.
ITEM 2. PROPERTIES
Domestic Facilities:
The Company's corporate headquarters and main MT&S plant, occupying 420,000
square feet, are located on 56 acres of land in Eden Prairie, Minnesota, a
suburb of Minneapolis. The original plant was completed in 1967. Six additions,
the most recent completed in 1997, have expanded the plant to its present size.
Approximately 50% of the Eden Prairie facility is used for manufacturing and
assembly while the balance of the facility is used for office space. In 1998,
17,000 square feet of manufacturing space was leased in Chanhassen, Minnesota
under a five year operating lease expiring in 2003. The Chanhassen site was
sublet during fiscal 2000 through the duration of the lease.
Electronic design and component assembly is conducted in a 57,000 square foot
facility in Chaska, Minnesota, approximately 10 miles west of the headquarters
in Eden Prairie. The building was completed in 1996. MTS has a five-year
operating lease with provisions to extend, purchase or terminate at the end of
the lease period. The terms of the lease agreement do not require capitalization
of the asset and the related obligation.
MTS Automation occupies a 30,000 square foot plant in New Ulm, Minnesota (65
miles southwest of Minneapolis). The plant provides assembly operations and
office space. The facility was constructed in 1993 by the New Ulm Economic
Development Corporation and expanded in 1995. MTS has a seven-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.
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In addition, MTS Automation occupies 30,000 square feet in Horsham,
Pennsylvania, a suburb of Philadelphia. Plant and office space in two buildings
is leased under conventional operating lease terms, expiring in 2001. During
fiscal 2000, a 90,000 square foot building was leased in another suburban
location, which will house this enterprise beginning in 2001. Approximately,
one-third of the space will be sublet until needed. The new lease term is five
years.
MTS 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.
MTD Raleigh is located adjacent to the MTS Sensors Division site in Cary, North
Carolina. A 25,000 square foot plant, constructed in 1991, provides
manufacturing and office space. In 2000, an additional 10,000 square was leased
in nearby Morrisville for quality assurance, warehousing and office space. This
lease expires in 2003.
MTS Noise and Vibration Division operates in two facilities. A 16,000 square
foot facility in Madison Heights, Michigan and a 13,000 square foot facility in
Milford, Ohio. Plant and office space in both facilities is leased under
conventional operating lease terms.
MTS-DSP Technology occupies a 57,200 square foot facility in Ann Arbor,
Michigan. The property and building carry a mortgage until 2015. Other
facilities include leased space of 13,000 square feet in Ann Arbor and 16,000
square feet in Fremont, California. Both locations are covered by conventional
operating lease terms.
The Company leases space in other U.S. cities for sales and service offices.
Neither the space nor the rental obligations is significant.
International Facilities:
MTS Systems GmbH is located in an 80,000 square foot facility in Berlin,
Germany. As of September 30, 2000--6,500 square feet has been leased to other
companies. The building is situated on land leased by MTS from the city
government. The lease expires in 2052.
MTS Systems (France) operates in a leased facility in Paris, France, of
approximately 38,000 square feet. Approximately, 40% of this space is used for
warehousing and service with the remainder used for offices. The current lease
expires at the end of calendar 2000.
MTS Sensors Technologie operates in a leased facility in Ludenscheid, Germany on
approximately six acres of land. The manufacturing and office facilities were
expanded in 1999 and now occupy 35,000 square feet at this location.
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Custom Servo Motors Antriebstechnik GmbH & Co. KG operates in two leased
facilities in Germany, one in Freiburg, and a new facility in Stralsund. The
Freiburg facility totals about 7,000 square feet and the Stralsund location is
about 16,000 square feet. All of the Freiburg facility is used for offices while
70% of the Stralsund facility is used for assembly with the remainder used as
office space.
The Company also leases office and general purpose space for its sales and
service subsidiaries in Gloucester, United Kingdom; Torino, Italy; Seoul, South
Korea; Tokyo and other cities, Japan; Gothenburg, Sweden; Beijing and other
cities, Peoples Republic of China; and Singapore. No manufacturing is conducted
at these locations.
Expansion Opportunities:
Capacity remains in Eden Prairie for limited facility expansion. Also, the sites
in Cary, North Carolina can be expanded. Other suitable commercial real property
is available for purchase or lease in metropolitan areas where the Company is
presently located. The Company considers its current facilities adequate to
support its operations in 2001.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various claims, legal actions and complaints arising
in the ordinary course of business. Management believes that the final
resolution of these matters will not have a material adverse effect on the
financial position or results of operation of the Company.
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, 2000, for a vote by the shareholders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's stock is traded on The Nasdaq Stock Market's National Market
(Nasdaq) under the symbol MTSC. The following table shows the Company's low and
high closing sale transactions as reported by Nasdaq.
Quarter Ended Low * High *
------------- ----- ------
December 31, 1998 $ 10.88 $ 15.44
March 31, 1999 $ 9.63 $ 14.38
June 30, 1999 $ 9.81 $ 13.25
September 30, 1999 $ 10.00 $ 14.63
December 31, 1999 $ 7.50 $ 10.63
March 31, 2000 $ 5.38 $ 9.59
June 30, 2000 $ 6.19 $ 7.88
September 30, 2000 $ 6.00 $ 7.50
* Source: The Nasdaq Stock Market, Inc. Summary of Activity Report
At December 4, 2000 there were 2,229 holders of record of the Company's $.25 par
value common stock. The Company estimates that there are an additional 3,000
beneficial shareholders whose stock is held by nominees or broker dealers.
The Company has a history of paying quarterly dividends and expects to continue
such payments in the future. During 2000, 1999, and 1998, the Company paid
dividends totaling $.24 per share, per year to holders of its common stock.
Under the terms of the Company's credit agreements, certain covenants require
that tangible net worth, as defined, must exceed a defined minimum amount and
limit repurchases of its common stock to a defined maximum amount. As of
September 30, 2000, tangible net worth exceeded the minimum by $29.9 million and
the Company had $17.9 million available for repurchases of its common stock. The
Company has flexibility to declare and pay dividends in the future similar to
recent dividends.
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ITEM 6. SELECTED FINANCIAL DATA
A comprehensive summary of selected financial information is presented in the
"Six Year Financial Summary" on page 14 of the Company's 2000 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 15 through 19 of the Company's 2000 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosures are included in Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 17 and in Note 1 to the Consolidated
Financial Statements included in the Company's 2000 Annual Report to
Shareholders. This information is incorporated herein by reference.
MARKET RISK ON CHANGES IN FOREIGN CURRENCY EXCHANGE RATES
Market risk from changes in foreign currency exchange rates may cause
fluctuations on the translation of orders, net revenue and net income. Currency
gains and losses from the settlement of foreign currency denominated
transactions are reported in the Consolidated Statements of Income as "Other
expense (income), net". The following table illustrates the impact of such
market risk on the above financial items for the respective years:
(expressed in thousands)
- ---------------------------------------------------------- ------------- ------------- --------------
2000 1999 1998
- ---------------------------------------------------------- ------------- ------------- --------------
Increase (Decrease) from translation:
- ---------------------------------------------------------- ------------- ------------- --------------
New orders $(2,324) $4,961 $(10,838)
- ---------------------------------------------------------- ------------- ------------- --------------
Net revenue (3,924) 3,313 (6,704)
- ---------------------------------------------------------- ------------- ------------- --------------
Net income (111) 60 (236)
- ---------------------------------------------------------- ------------- ------------- --------------
- ---------------------------------------------------------- ------------- ------------- --------------
Transaction Gain (Loss) in
- ---------------------------------------------------------- ------------- ------------- --------------
"Other expense (income), net" $ (538) $ (375) $ 2,340
- ---------------------------------------------------------- ------------- ------------- --------------
The Company regularly assesses risks from foreign currency exchange rates and
has practices to protect against the adverse effects of these and other
potential exposures. To manage such risk, the Company, when deemed appropriate,
enters into forward contracts. The Company is principally exposed to foreign
currency movements related to non-U.S. dollar denominated assets and uncertainty
related
14
to future revenues that are denominated in foreign currencies. The Company's
most significant foreign currency exposures relate to contracts in backlog and
unbilled receivables in the Japanese yen, the Euro, and the German mark, which
are undelivered or outstanding at the end of fiscal 2000. A hypothetical 10
percent increase in the levels of foreign currency exchange rates against the
U.S. dollar with all other variables held constant would result in a decrease in
future revenues and asset balances of approximately $ 1.5 million. Conversely, a
hypothetical 10 percent decrease in the levels of foreign currency exchange
rates against the U.S. dollar with all other variables held constant would
result in an increase to future revenues and asset balances of approximately $
1.6 million.
MARKET RISK ON CHANGES IN INTEREST RATES
The Company also experiences interest rate risk on its fixed and variable
indebtedness. MTS manages such risk by balancing the amount of fixed and
variable rate debt. For fixed rate debt, interest rate changes affect the fair
market value of such debt but do not impact earnings. In contrast, interest rate
risk on variable rate debt generally does not affect the fair market value of
such debt but does impact future earnings and cash flows, assuming other factors
are held constant.
At September 30, 2000 the Company had fixed rate debt of $58.4 million and
variable rate debt of $17.5 million. Holding other variables constant (such as
foreign exchange rates and debt levels), a one percentage point increase in
interest rates would have decreased the unrealized fair market value of fixed
rate debt at September 30, 2000 by approximately $800 thousand. The impact on
variable rate debt would decrease income before income taxes and increase cash
outflows for the next year by approximately $200 thousand.
FORWARD LOOKING STATEMENTS
Statements included or incorporated by reference in this Form 10-K (including
the 2000 Annual Report to Shareholders) and in the Company's press releases and
in oral statements made with the approval of an authorized executive officer,
which are not historical or current facts are "forward-looking statements" made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results and those
presently anticipated or projected. The following important facts, among others,
could affect the Company's actual results in the future and could cause the
Company's actual financial performance to differ materially from that expressed
in any forward-looking statement:
(i) With regard to the Company's 2000 product developments, there
may be uncertainties unknown to the Company concerning the
expected results.
15
(ii) Possible significant volatility in both backlog and quarterly
operating results may result from large, individual, fixed
price orders, generally over $10 million, in connection with
sales of MT&S systems.
(iii) Export controls based on U.S. initiatives and foreign policy,
as well as import controls imposed by foreign governments, may
cause delays for certain shipments or the rejection of orders
by the Company. Such delays could create material fluctuations
in quarterly results and could have a material adverse effect
on results of operations. Foreign revenues may also be
affected by local political conditions and/or currency
restrictions.
(iv) Delays in realization of $163.0 million in backlog orders as
of September 30, 2000 (approximately $155.0 million of which
are anticipated to be recognized during fiscal 2001) may occur
due to technical difficulties, export licensing approval or
the customer's preparation of the installation site, any of
which can affect the quarterly or annual period when backlog
is recognized as revenue and could materially affect the
results of any such period.
(v) The Company experiences competition on a worldwide basis.
Customers may choose to purchase equipment from the Company or
from its competitors. For the MT&S reportable segment,
customers may also contract with testing laboratories or
construct their own testing equipment, purchasing commercially
available components. Factors which influence the customer's
decision include price, service and required level of
technology.
(vi) The Company's short-term borrowings carry interest rate risk
that is generally related to either LIBOR or the prime rate.
The Company has minimal earnings and cash flow exposure due to
market risks on its long-term debt obligations as a result of
the primarily fixed-rate nature of the debt.
The foregoing list is not exhaustive, and the Company disclaims any obligation
subsequently to revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, Report of Independent Public Accountants,
Quarterly Financial Information (unaudited), and Six Year Financial
16
Summary (unaudited) included in the Company's 2000 Annual Report to Shareholders
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The Corporate Executive Officers of the Registrant on the date of this report
are:
Name and Age Position Officer Since
- ------------ -------- -------------
S. W. Emery, Jr. (54) Chairman, President and 1998
Chief Executive Officer
K. D. Zell (58) Executive Vice President 1979
D. E. Hoffman (53) Vice President and CFO 1999
W. G. Anderson (44) Vice President 1998
S. M. Cohoon (46) Vice President 1996
K.D. Donaldson, Jr. (48) Vice President 2000
J. M. Egerdal (49) Vice President 1996
L.B. Hamilton (39) Vice President 2000
D.G. Krantz (45) Vice President 2000
K.M. Staby (54) Vice President 2000
M. G. Togneri (63) Vice President 1991
Officers serve at the discretion of and are elected annually by the board of
directors and serve until their successors are elected. 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
------- -------------------
S. W. Emery, Jr. Chairman since January 1999. President and Chief Executive Officer since
March 17, 1998. Management and executive positions with Honeywell, Inc.
from 1985 to 1997. (Area Vice President Western and Southern Europe from
1994 to 1997; Group Vice President, Military Avionics Systems from 1989 to
1994; Vice President and General Manager, Space Systems Division from 1988
to 1989; Vice President Operations, Process Controls Division from 1985 to
1988.
K. D. Zell Executive Vice President since 1993. Vice President of Materials Testing
Division from 1988 to 1993. Vice President, Sales and Service from 1984
18
Officer Business Experience
------- -------------------
to 1988. Vice President, Product Group from 1979 to 1984.
D. E. Hoffman Vice President and CFO since July 1999. Prior to MTS, he was Vice
President and CFO of MVE, Inc. from 1998 to 1999, CFO for the Harmon
Limited Group of Apogee Enterprises, Inc. from 1994 to 1997, and he
held various management positions with ABB Ltd. from 1983 to 1994.
W. G. Anderson Vice President, MTS Automation Division, since 1998. President of
Custom Servo Motors from 1992 to 1998.
S. M. Cohoon Vice President of Vehicles Dynamics Division since 1996. Prior to his
employment at MTS he held various engineering and management positions
at General Motors Corporation.
K.H. Donaldson, Jr. Vice President of Strategic Planning and Product Development since 2000.
Sales engineer, Aerospace from 1995 to 2000.
J. M. Egerdal Vice President, MTS Services and Support Division since 1997; Vice
President, North American Sales from 1996 to 1997; Regional Sales and
Service Management from 1988 to 1996.
L.B. Hamilton Vice President of Material Testing and Aerospace Divisions since 2000.
Director of Re-engineering from 1999 to 2000. Vice President, Anatomic
Pathology Business, Quest Diagnostics from 1997 to 1999. Executive
Director Revenue Services, Quest Diagnostics (Division of Corning, Inc.)
from 1995 to 1997.
D.G. Krantz Vice President of Advanced Engineering Solutions Division since 2000.
Program
19
Officer Business Experience
------- -------------------
manager, Advanced Systems from 1995 to 2000.
K. M. Staby Vice President of Human Resources since 2000. Various management
positions at Medtronic, Inc. from 1974 to 1999--Vice President, Human
Resources for Cardiac Rhythm Management 1991-1999 and for Worldwide
Distribution 1989 to 1991).
M.G. Togneri Vice President of Sensors Division since 1998. Vice President of Factory
Automation sector from 1991 to 1997.
Prior to his employment at MTS was Vice President 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.
(a) Information concerning the Company's Directors, including business
experience, can 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 30, 2001, and is incorporated herein by reference.
(b) There are no family relationships between and among directors or
officers.
(c) 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 30, 2001,
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
ITEM 11. EXECUTIVE COMPENSATION
See Item 12.
20
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 30, 2001, pursuant
to Regulation 14A under the Securities Exchange Act of 1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
21
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: None.
(c) Exhibits:
2.a Agreement and Plan of Merger among MTS Systems
Corporation , Badger Merger Corp., and DSP Technology
Inc., filed on Form S-4 (File No. 333-77277) on April
28, 1999, is incorporated by reference herein.
3.a Restated and amended Articles of Incorporation, adopted
January 30, 1996, incorporated by reference from
exhibit 3.a of Form 10-K for the fiscal year ended
September 30, 1996.
3.b Restated Bylaws, reflecting amendments through May 26,
1998, incorporated by reference from exhibit 3.b. of
Form 10-K for the fiscal year ended September 30, 1998.
10.a Management Variable Compensation Plan and Long Range
Incentive Plan for fiscal 2000, dated November 30,
1999.
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, as amended, incorporated by
reference from exhibit 10.c of Form 10-K for the fiscal
year ended September 30, 1996.
10.d 1990 Stock Option Plan, as amended, incorporated by
reference from exhibit 10.d of Form 10-K for the fiscal
year ended September 30, 1996.
10.e 1994 Stock Plan, as amended, incorporated by reference
from exhibit 10.e of Form 10-K for the fiscal year
ended September 30, 1996.
22
Exhibits:
10.f 1997 Stock Option Plan, as amended, incorporated by
reference from exhibit 10.p of Form 10-K for the fiscal
year ended September 30, 1999.
10.g 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.h 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.i Severance Agreement, dated July 28, 1999 between the
Registrant and David E. Hoffman, incorporated by
reference to exhibit 10.k of Form 10-K for the fiscal
year ended September 30, 1999.
10.j Severance Agreement, dated March 27, 1998 between the
Registrant and Keith D. Zell, as amended, incorporated
by reference from exhibit 10.m of Form 10-K for the
fiscal year ended September 30, 1998.
10.k Severance Agreement, dated March 24, 1998 between the
Registrant and Mauro G. Togneri, as amended,
incorporated by reference from exhibit 10.n of Form
10-K for the fiscal year ended September 30, 1998.
10.l 1992 Employee Stock Purchase Plan, incorporated by
reference to exhibit 4(a) from Form S-8, File No.
33-45386.
10.m Severance Agreement, dated March 18, 1998 between the
Registrant and Steven M. Cohoon as amended,
incorporated by reference from exhibit 10.q of Form
10-K for the fiscal year ended September 30, 1998.
10.n Severance Agreement, dated March 16, 1998 between the
Registrant and Sidney W. Emery, incorporated by
reference from exhibit 10.r of Form 10-K for the fiscal
year ended September 30, 1998.
10.o Change in Control Agreement, dated March 16, 1998
between the Registrant and Sidney W. Emery incorporated
23
Exhibits:
by reference from exhibit 10.s of Form 10-K for the
fiscal year ended September 30, 1998.
10.p Change in Control Agreement, dated March 27, 1998
between the Registrant and Keith D. Zell incorporated
by reference from exhibit 10.t of Form 10-K for the
fiscal year ended September 30, 1998.
10.q Change in Control Agreement, dated March 24, 1998
between the Registrant and Mauro G. Togneri
incorporated by reference from exhibit 10.v of Form
10-K for the fiscal year ended September 30, 1998.
10.r Change in Control Agreement, dated July 28, 1999
between the Registrant and David E. Hoffman
incorporated by reference from exhibit 10.y of Form
10-K for the fiscal year ended September 30, 1999.
10.s Change in Control Agreement, dated March 18, 1999
between the Registrant and Steven M. Cohoon
incorporated by reference from exhibit 10.z of Form
10-K for the fiscal year ended September 30, 1999.
10.t Severance Agreement, dated March 13, 1998 between the
Registrant and William G. Anderson incorporated by
reference from exhibit 10.aa of Form 10-K for the
fiscal year ended September 30, 1998.
10.u Severance Agreement, dated March 14, 1998 between the
Registrant and James M. Egerdal incorporated by
reference from exhibit 10.ab of Form 10-K for the
fiscal year ended September 30, 1998.
10.v Change in Control Agreement, dated March 13, 1998
between the Registrant and William G. Anderson
incorporated by reference from exhibit 10.ac of Form
10-K for the fiscal year ended September 30, 1998.
10.w Change in Control Agreement, dated March 14, 1998
between the Registrant and James M. Egerdal
incorporated by reference from exhibit 10.ad of Form
10-K for the fiscal year ended September 30, 1998.
10.x Severance Agreement, dated January 3, 2000 between the
Registrant and Kathleen M. Staby.
24
Exhibits:
10.y Change in Control Agreement, dated January 3, 2000
between the Registrant and Kathleen M. Staby.
13. Annual Report to Shareholders for the fiscal year ended
September 30, 2000.
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.
25
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/ Sidney W. Emery, Jr.
-----------------------------------
Sidney W. Emery Jr.
Chairman, President and Chief
Executive Officer
By: /s/ David E. Hoffmann
-----------------------------------
David E. Hoffman
Vice President and Chief Financial Officer
Date: December 21, 2000
26
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/ Charles A. Brickman
--------------------------------------------
Charles A. Brickman, December 21, 2000
Director
By: /s/ Jean Lou Chameau
-----------------------------------
Jean Lou Chameau, December 21, 2000
Director
By: /s/ Bobby I. Griffin
-----------------------------------
Bobby I. Griffin, December 21, 2000
Director
By: /s/ Russell A. Gullotti
--------------------------------------------
Russell A. Gullotti, December 21, 2000
Director
By: /s/ Brendan Hegarty
-----------------------------------
Brendan Hegarty, December 21, 2000
Director
By: /s/ Linda Hall Whitman
--------------------------------------------
Linda Hall Whitman, December 21, 2000
Director
27
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
A. CONSOLIDATED FINANCIAL STATEMENTS
Reference is made to the consolidated financial statements in the
Company's 2000 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) 19 ---
Consolidated Balance Sheets - September 30, 2000 20 ---
and 1999
Consolidated Statements of Income and Shareholders'
Investment for the Years Ended September 30, 2000,
1999 and 1998 21 ---
Consolidated Statements of Cash Flows for the
Years Ended September 30, 2000, 1999 and 1998 22 ---
Notes to Consolidated Financial Statements 23 ---
Report of Independent Public Accountants 33 ---
F-1
Annual
Report 10-K
Page Page
B. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE --- F-3
C. CONSOLIDATED SCHEDULE
Schedule Description
- -------- -----------
II Summary of Consolidated Allowances for
Doubtful Accounts and Restructuring Reserves --- F-4
All schedules except the one 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.
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To MTS Systems Corporation:
We have audited in accordance with auditing standards generally accepted in the
United States, 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 28, 2000. Our audit
was made for the purpose of forming an opinion on those statements taken as a
whole. The schedule (page F-4) listed as a part of Item 14 in this Form 10-K is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Minneapolis, Minnesota,
November 28, 2000
F-3
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE II - SUMMARY OF CONSOLIDATED ALLOWANCES
FOR DOUBTFUL ACCOUNTS AND RESTRUCTURING RESERVES
FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999, AND 1998
Balance Amounts Balance
Beginning Written-Off/ End of
of Year Provisions Payments Year
--------------- ---------- --------- --------
(expressed in thousands)
Allowance for Doubtful Accounts:
- --------------------------------
2000 $2,232 $566 $(543) $2,255
1999 2,285 679 (732) 2,232
1998 2,160 344 (219) 2,285
Restructuring Reserves:
- -----------------------
2000 $3,101 $1,210 $(3,101) $1,210
1999 - 5,711 (2,610) 3,101
1998 - - - -
F-4
EXHIBIT INDEX
Exhibit
No. Description
--- -----------
10.a Management Variable Compensation Plan and Long Range
Incentive Plan for fiscal 2000
10.x Severance Agreement, dated January 3, 2000 between the
Registrant and Kathleen M. Staby
10.y Change in Control Agreement, dated January 3, 2000
between the Registrant and Kathleen M. Staby
13. Annual Report to Shareholders for the fiscal year ended
September 30, 2000
21. Subsidiaries of the Company
23. Consent of Independent Public Accountants
27. Financial Data Schedule