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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:
Name and Age Position Officer Since
- ------------ -------- -------------
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
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
Construction Buildings and Machinery
Land in Process Improvements and Equipment Total
(expressed in thousands)
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
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE VI - SUMMARY OF CONSOLIDATED ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
Buildings and Machinery
Improvements and Equipment Total
(expressed in thousands)
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
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - SUMMARY OF CONSOLIDATED ALLOWANCES
FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1994, 1993, AND 1992
Balance Provision Amounts Balance
Beginning Charged to Written End of
of Year Operations Off Year
(expressed in thousands)
1994 $ 1,461 $ 110 $ (132) $ 1,439
1993 608 981 (128) 1,461
1992 511 262 (165) 608
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