MTS Systems Management Discusses Q3 2012 Results - Earnings Call Transcript

MTS Systems (MTSC)

Q3 2012 Earnings Call

August 03, 2012 10:00 am ET

Executives

Susan E. Knight - Chief Financial Officer and Senior Vice President

Jeffrey A. Graves - Chief Executive Officer and Director

Analysts

John Franzreb - Sidoti & Company, LLC

Liam D. Burke - Janney Montgomery Scott LLC, Research Division

Presentation

Operator

Good day, and welcome to the MTS Third Quarter 2012 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Sue Knight. Please go ahead, ma'am.

Susan E. Knight

Thank you, Rochelle. Good morning, and welcome to MTS Systems Fiscal 2012 Third Quarter Investor Teleconference. Joining me on the call today is Jeff Graves, President and Chief Executive Officer. I'd like to remind you that statements made today which are not historical facts should be considered forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Future results may differ materially from these statements, depending upon risks, some of which are beyond management's control. A list of such risks can be found on the company's latest SEC forms 10-Q and 10-K. The company disclaims any obligation to revise forward-looking statements made today based on future events. This presentation may also include reference to financial measures, which are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. These measures may be used by management to compare the operating performance of the company over time. They should not be considered an isolation or a substitute for GAAP measures.

Jeff will now begin his update on our third quarter results.

Jeffrey A. Graves

Thank you, Sue, and good morning, everyone. Thank you for joining us today for our third quarter investor call. As you know, this is my first earnings call as the leader of MTS, and I'm delighted to be here with you this morning. Before Sue and I discuss the financial results, I'd like to briefly share with you the reasons why I took this role and after 3 months, the reasons why I'm more excited than ever about MTS. So why did I take this job? In addition to being an excellent fit with my background and prior experience, it was opportunity to lead a company which has a clear and successful business model based on technology leadership, a globally recognized brand and wonderfully innovative employees and a strong reputation for customer intimacy with companies that are leaders in the markets they served. Since joining MTS, I've had the pleasure of meeting many of our customers around the world across our markets in the U.S., Europe and Asia, and their feedback has reinforced my initial perceptions of the strength of this company. Our customers who are the leaders in their respective industries of MTS for many reasons, but 3 of these stand out above all others. The first is our unrivaled engineering excellence in the areas of testing and sensors. Second is the intimate knowledge of our customers' business needs obtained through years or, in many cases, decades of working closely together to solve very challenging problems. And third is the consistent long-term support we deliver to help our customers address their rapidly changing market requirements around the world. These 3 factors represent the core of MTS' sustainable competitive advantage that has led through our leaderships in the markets that we serve and upon which we will build the future of the company.

While I've been here only a short time, given this excellent foundation and strong market position, I'm very excited about the future of the company. I believe that with my passion for our business and an intense focus on delivering sustainable profitable growth, I can help MTS achieve its full potential. I'll comment further on this later in my discussion. So now let's move on to today's agenda and our Q3 results.

For today's call, I will first discuss the key takeaways from our fiscal third quarter, including a recently announced settlement with the U.S. Government and provide some color on our end markets and year-to-date orders. Sue will then walk you through the quarterly financials in more detail. I'll then close with a few comments on our outlook for the remainder of 2012, and the next steps and timing to finalize the key tenets of our multiyear strategy. We'll then open the call for your questions.

There are 4 key takeaways for you for the quarter. First, the company, driven by our Test business had an outstanding quarter, with record high revenue and earnings per share from operations, excellent cash flow and a continuing solid backlog of business. We obtained these results in spite of significant currency headwinds, which were a drag on the results across both of our businesses and in spite of the economic sluggishness in which our Sensors business continues to operate today.

Second, our robust investments in R&D, compliance and project management, processes and systems are continued in the quarter, enabling us to meet our customer commitments, which are at a significantly higher level than ever in supporting our future growth objectives.

Third, we reached a preliminary settlement agreement with the Department of Justice, ending the ongoing investigation. While subject to final approval in Washington, we accrued the agreed-upon settlement amount of $7.75 million in our third quarter, the details of which were announced earlier this week.

Finally, based upon our positive momentum and strong focus on execution, we're pleased to confirm our previous outlook for the full year revenue and earnings per share from operations. Sue and I will discuss these topics in more detail beginning with third quarter orders.

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