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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, 1996 Commission File Number 0-2382
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.)
612-937-4000
(Telephone number of registrant
including area code)
14000 Technology Drive, Eden Prairie, Minnesota 55344-9763
(Address of principal executive offices) (Zip Code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK (PAR VALUE OF $.25 PER SHARE)
Indicate by check mark whether the 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 November 29, 1996, 9,151,794 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 $160,148,437.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for Fiscal Year ended September 30, 1996 - Parts
I, II and IV.
Proxy Statement for Annual Meeting of Shareholders, statement dated prior to
January 28, 1997 - 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 (the Mechanical Testing and Simulation sector), and
measurement and control products for measuring process variables and automating
manufacturing processes (the Industrial Measurement and Automation sector).
MTS's customers use these systems and products to improve product quality,
accelerate product development, increase machine and worker productivity and
protect the environment.
The Company's 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
customer's needs and to analyze results. These technologies offer the customer
solutions to problems in a variety of markets.
CUSTOMERS AND PRODUCTS BY MARKET SECTOR
The Company's operations are organized into two business sectors: 1) Mechanical
Testing and Simulation, and 2) Industrial Measurement and Automation. 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 Sector: Customers in this sector 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 (markets, market niches or niches) in this sector 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 principle subsystems such as landing gear.
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 control
quality in the manufacturing of materials.
BIOMECHANICS: This market is comprised of university and government research
laboratories and manufacturers of implants, prostheses and other medical and
dental devices and materials.
These organizations use the Company's systems and software to determine the
durability and performance of such products in use, which frequently requires
the Company's systems to replicate conditions within and forces withstood by the
human body.
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 PRODUCTS/MATERIAL PRODUCERS: These organizations are grouped together
because they primarily purchase the Company's electromechanical and
servohydraulic material testing systems which are used in research, product
development and extensively for quality control during production.
Typical consumer products are made of textiles, paper products and plastic films
of many types. Material producers include metal, ceramic, composite, paper and
plastic manufacturers.
GROUND VEHICLE INDUSTRY: This market consists of automobile, truck, and off-road
vehicle manufacturers and their suppliers. This market niche is the largest
within the Mechanical Testing and Simulation 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 and durability,
accelerate design development work and decrease the cost to manufacture their
products and components.
Occupant safety is another purpose for use of the Company's systems and software
to test vehicle designs and prototypes.
ADVANCED SYSTEMS: The Company also offers highly customized systems for
simulation and testing through its Advanced Systems Division. These systems
frequently embody technology which is new to the application. Customers of the
Advanced Systems Division come from all industries served by the Mechanical
Testing and Simulation sector - aerospace and defense, biomechanics, civil
engineering, material suppliers, and ground vehicles.
The Advanced Systems Division aids customers in the development of new
manufacturing technologies and systems such as welding and material processing.
Mechanical Testing and Simulation sector accounted for 82% of revenue in 1996,
81% of revenue in 1995 and 82% of revenue in 1994. It represents the oldest and
is the principal market for the Company's technology. This sector is responsible
for the Company's traditional corporate image: "a leading supplier of test
equipment to laboratories".
Industrial Measurement and Automation Products: Measurement and Automation
customers use MTS products in discrete part and fluid process manufacturing.
Product niches in this sector include:
DISPLACEMENT POSITION AND LIQUID-LEVEL SENSORS BASED ON MAGNETOSTRICTIVE
TECHNOLOGY. Displacement sensors accurately measure position up to 50 feet. They
are used in discrete (piece part) manufacturing where accurate positioning is
critical. Major applications include injection molding and die casting machines,
printing and packaging machines and presses of all types.
Liquid level sensors accurately measure levels of liquids in containers. These
sensors are sold in three markets: the underground storage tank (UST) market,
the process storage tank (PST) market and the large, above-ground inventory
storage tank (AST) market.
The UST market consists primarily of retail gas stations. It is served by
original equipment manufacturers (OEM's) who purchase MTS sensing probes and
incorporate them with their proprietary electronic unit to monitor fuel
inventory and detect leaks.
The PST market includes a wide variety of applications in the chemical,
petroleum refining, pharmaceutical, and food industries. This market generally
requires sensors less than 25 feet in length.
The AST market of above ground liquid storage tanks and tank farms is the newest
application for these sensors. This market requires sensors up to 100 feet in
length. MTS also sells controlling and indicating instruments to this market for
use on installations of up to several hundred tanks.
SERVO MOTORS AND CONTROLLERS. Customers use high-performance, permanent magnet
brushless servo motors and amplifiers to automate discrete-part manufacturing
machines and systems such as machine tools and converting and packaging
machines. Customers also use the Company's control products for accurate control
of complex, multi-axis, rotary and linear machine motions. These motors,
amplifiers and motion control products create systems that are applied to a wide
variety of automation tasks by both end-users and OEM's.
The Industrial Measurement and Automation sector accounted for 18% of revenue in
1996, 19% of revenue in 1995 and 18% of revenue in 1994.
COMMON TECHNOLOGIES
MTS' systems and products in both sectors 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 Mechanical Testing and Simulation
sector are in some cases undertaken on "cost-plus-fixed-fee" contract basis.
1996 PRODUCT DEVELOPMENT HIGHLIGHTS
The Company funds new application and product development within its market
sectors. Highlights of product development undertaken or completed in 1996
include:
Mechanical Testing and Simulation Sector
* The Company introduced the Tytron(TM) microforce testing system, our first
testing system designed specifically for very low-force testing and which
can accommodate very small specimens. The microelectronics industry is the
primary target market for this product.
* The Company introduced the Flat-Trac(R) III tire performance testing
system. Tire engineers use this product to research tread wear and rolling
resistance to develop longer lasting, safer tires.
* The Company introduced a twelve-station human hip simulator for use in
testing materials and prosthetic designs. This product offers customers
additional testing capacity at a price comparable to our previous
eight-station hip simulator.
Industrial Measurement and Automation Sector
* The Company completely redesigned the basic elements of its Temposonics(R)
linear displacement sensors. The new, patented design features modular
construction for unprecedented precision and improved configurability and
ruggedness.
* The Company introduced the XDC 720 multi-axis controller, which can control
up to 28 independent machine axes, making it ideal for complex packaging
operations.
* The Company introduced a new, larger (12 inch frame) motor in its Max
Plus(TM) line of permanent magnetic servo motors designed for spindle drive
applications for use primarily in the machine tool industry. The design is
able to operate at full torque over a range of speeds, thereby eliminating
the need for mechanical transmissions on machine tools.
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 was not
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 $20 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 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.
Industrial Measurement and Automation products are sold in quantity at unit
prices ranging from $500 to $10,000. Delivery varies from several days to
several months.
Approximately 49% of revenue in fiscal 1996, 54% of revenue in 1995, and 51% of
revenue in 1994 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 it products using a number of sales channels. The
Company sells its Mechanical Testing and Simulation equipment 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 sector follows:
Domestic offices:
Akron Dayton Philadelphia
Austin Denver Raleigh
Baltimore Detroit Pittsburgh
Boston Huntsville San Diego
Chicago Los Angeles San Jose
Cincinnati Minneapolis Seattle
Dallas 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 Torino, Italy
Gothenburg, Sweden Stroud, United Kingdom
Hong Kong Nagoya and Tokyo, Japan
Singapore
In addition, MTS 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 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 Industrial Measurement and Automation sector sells its products through
sales channels separate from the Mechanical Testing and Simulation sector. A
network of employees, direct sales, external domestic distributors,
representatives, and system houses market the products of these divisions.
International revenue currently accounts for 31% of this sector'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 Geographic Segment Information on pages 17 and 27 of
the Company's 1996 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 1996, 1995 and 1994
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 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 $120.5 million at September 30, 1996; $98.8 million at September 30,
1995; and $84.6 million at September 30, 1994. The Company believes that nearly
all of the backlog at September 30, 1996 will become revenue during fiscal 1997.
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 Mechanical Testing and Simulation sector, customers may choose to buy
equipment from the Company or from competitors, principally: Instron (U.S.
based), Instron Schenck Testing Systems (U.S.-German joint venture) Interlachen
(U.S.), SATEC (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 Industrial 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,
Mannesman (Germany) and Fanuc (Japan).
MANUFACTURING AND ENGINEERING
The Company conducted a significant portion of its fiscal 1996 Mechanical
Testing and Simulation 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 are assembled in the Raleigh, NC, facility and in the
Paris, France (Adamel-Lhomargy) facility. The Company's MTS-PowerTek subsidiary
engineers and assembles dynamometer control systems and provides related
services from Detroit.
Manufacturing and engineering activities for the Industrial Measurement and
Automation sector occur in Raleigh, NC, in Ludenscheid, Germany, in New Ulm, MN,
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 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.
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 $17.7, $13.7 and $12.6 million for fiscal
years 1996, 1995 and 1994, 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 approximates 10% of annual sales volume.
Executive Officers of the Company
The Corporate Executive Officers of the Registrant on September 30, 1996 were:
Name and Age Position Officer Since
- ------------ -------- -------------
D. M. Sullivan (61) Chairman, President and 1976
Chief Executive Officer
K. D. Zell (54) Executive Vice President 1979
W. G. Beduhn (55) Vice President 1983
M. L. Carpenter (59) Vice President 1973
and Chief Financial Officer
M. G. Togneri (59) 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.
EMPLOYEES
MTS employed 1,725 persons as of September 30, 1996, including 286 employees in
Europe, 48 in Japan, 13 in China, 3 in Canada, 12 in Korea and 4 in Hong Kong.
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 an early date, can
change the expected 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 on 52 acres of land in Eden Prairie, Minnesota, a suburb of
Minneapolis. The original plant was completed in 1967. Five additions, the most
recent of which was in 1990, have expanded the plant to its present size.
Approximately 45% of the Minneapolis facility is used for manufacturing and
assembly while the balance of the facility is used for office space.
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.
Custom Servo Motors, Inc. 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 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.
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.
MTS-PowerTek, Inc. occupies 20,000 square feet in Farmington Hills, Michigan, a
suburb of Detroit. Plant and office space in two buildings is leased under
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 (Berlin) is located in a 80,000 square foot facility. As of
September 30, 1996 3,000 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 2069.
MTS Adamel Lhomargy S.A., operates in a leased facility in Paris, France, of
approximately 38,000 square feet. Approximately 40% of this space is used for
manufacturing with the remainder used as offices. The current lease expires at
the end of fiscal 1998.
MTS Sensors Technologie operates in a leased facility in Ludenscheid, Germany on
approximately six acres of land. The manufacturing and office facilities occupy
18,000 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 conducted at these locations.
Expansion Opportunities:
The Company owns an additional 55 acres of land adjacent to its Minneapolis
facility. This site could house expanded manufacturing operations. Also, the
sites in Cary could 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 1997.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings were pending or threatened against the Company or
its subsidiaries as of September 30, 1996.
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, 1996, 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 Nasdaq Stock Market's National Market under
the symbol MTSC. The following table shows the Company's low and high closing
sale transactions as reported by The Nasdaq. Share prices for 1996 and prior
have been restated retroactively for the two-for-one stock split effected in the
form of a 100% stock dividend effective April 1, 1996.
Quarter Ended Low * High*
------------- ----- -----
December 31, 1994 $10.125 $12.375
March 31, 1995 $11.00 $12.875
June 30, 1995 $11.75 $13.875
September 30, 1995 $13.375 $14.625
December 31, 1995 $13.875 $17.75
March 31, 1996 $14.00 $19.375
June 30, 1996 $17.50 $22.50
September 30, 1996 $18.50 $21.50
*Source: The Nasdaq Stock Market, Inc. Summary of Activity Report
As of November 29, 1996 there were 1,523 holders of record of the Company's $.25
par value common stock. The Company estimates that there are an additional 1,900
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 1996, 1995, and 1994, the Company paid
dividends totaling $.32, $.28, and $.28 per share, per year, respectively, 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, 1996, tangible net worth exceeded the minimum by $17.4 million and
the Company had $3.4 million available for repurchases of its common stock.
Thus, the Company has flexibility to declare and pay dividends in the future
similar to recent dividends.
ITEM 6. SELECTED FINANCIAL DATA
A comprehensive summary of selected financial information is presented in the
"Six Year Financial Summary" on page 16 of the Company's 1996 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 17 through 21 of the Company's 1996 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 1996 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 28, 1997,
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 28, 1997, 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.
K. D. Zell Executive Vice President of Mechanical
Testing and Simulation sector 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.
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.
M.G. Togneri Vice President of Industrial Measurement
and Automation sector since 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.
(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 28, 1997,
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 28, 1997, 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 1996.
(c) Exhibits:
3.a Amended and restated Articles of Incorporation, adopted
January 30, 1996.
3.b Restated Bylaws, reflecting amendments through May 15,
1995, incorporated by reference to exhibit 3.b of Form
10-K for the fiscal year ended September 30, 1995.
10.a Management Variable Compensation Plan-Fiscal 1996,
dated November 20, 1995.
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.
10.d 1990 Stock Option Plan, as amended.
10.e 1994 Stock Plan, as amended.
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 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.i 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.j 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.k 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.l 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.m 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.n 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.o 1992 Employee Stock Purchase Plan, incorporated by
reference to exhibit 4(a) from Form S-8, File No.
33-45386.
10.p 1997 Stock Option Plan.
10.q Severance Agreement, dated September 30, 1996 between
the registrant and Steven M. Cohoon.
13. Annual Report to Shareholders for the fiscal year ended
September 30, 1996.
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/ Marvin R. Eckerle
------------------------------------------
Marvin R. Eckerle
Controller
Date: December 19, 1996
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 19, 1996
Director
By: /s/ Charles A. Brickman
------------------------------------------
Charles A. Brickman, December 19, 1996
Director
By: /s/ Bobby I. Griffin
------------------------------------------
Bobby I. Griffin, December 19, 1996
Director
By: /s/ Russell A. Gullotti
------------------------------------------
Russell A. Gullotti, December 19, 1996
Director
By: /s/ Thomas E. Holloran
------------------------------------------
Thomas E. Holloran, December 19, 1996
Director
By: /s/ Thomas E. Stelson
------------------------------------------
Thomas E. Stelson, December 19, 1996
Director
By: /s/ Linda Hall Whitman
------------------------------------------
Linda Hall Whitman, December 19, 1996
Director
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 1996 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) 21 ---
Consolidated Balance Sheets - September 30, 1996 22 ---
and 1995
Consolidated Statements of Income and Shareholders'
Investment for the Years Ended September 30, 1996,
1995 and 1994 23 ---
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1996, 1995 and 1994 24 ---
Notes to Consolidated Financial Statements 25 ---
Report of Independent Public Accountants 32 ---
B. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE --- F-3
C. CONSOLIDATED SCHEDULE
Schedule Description
II Summary of Consolidated Allowances for
Doubtful Accounts --- 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.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
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 22, 1996. 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
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic 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 financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
November 22, 1996
MTS SYSTEMS CORPORATION AND SUBSIDIARIES
SCHEDULE II - SUMMARY OF CONSOLIDATED ALLOWANCES
FOR DOUBTFUL ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Balance Provision Amounts Balance
Beginning Charged to Written End of
of Year Operations Off Year
--------- ---------- ------- -------
(expressed in thousands)
1996 $1,824 $ 330 $ (413) $1,742
1995 1,439 620 (235) 1,824
1994 1,461 110 (132) 1,439
EXHIBIT INDEX
Exhibit
No. Description
-------- -----------
3.a Amended and restated Articles of Incorporation,
adopted Janurary 30, 1996.
10.a Management Variable Compensation Plan-Fiscal
1996
10.c 1987 Stock Option Plan, as amended
10.d 1990 Stock Option Plan, as amended
10.e 1994 Stock Plan, as amended
10.p 1997 Stock Option Plan
10.q Severance Agreement Dated September 30, 1996
13. Annual Report to Shareholders for the fiscal year
ended September 30, 1996
21. Subsidiaries of the Company
23. Consent of Independent Public Accountants
27. Financial Data Schedule