MTS responds strongly after settlement

  • Article by: DEE DEPASS , Star Tribune
  • Updated: August 3, 2012 - 8:14 PM

Despite a $7.75 million settlement with the U.S. government this week, MTS Systems Corp. officials told Wall Street analysts Friday that the testing equipment firm has a bright future, strong sales and robust opportunities in China.

New CEO Jeff Graves said in a conference call that the government probe into alleged violations of export laws was behind the company and that it is focused on product development and global expansion.

Wall Street applauded the optimism and strong quarterly earnings results released late Thursday. MTS shares soared 15 percent Friday to close at $49.52, up $6.50.

A recent trip to China attracted 50 new customers, Graves said. Test equipment sales hit a record during the fiscal third quarter. Large customers order sales brought in $20 million for the quarter, following a prior spike of $35 million in large orders.

Third-quarter revenue grew 21 percent to $142 million, thanks to a jump in orders for the company's sophisticated industrial testing equipment used in automotive, tractor, and other manufacturing plants.

"MTS has always impressed me as a technology leader adept at solving our customers' toughest engineering problems," Graves said. "We have a strong market position. I am very excited about this company."

Yet obstacles remain.

While sales and back orders flourished for MTS test systems, sensor sales for the quarter fell 12 percent from a year ago to $24.5 million due to the slowing global economy and negative currency impacts.

China's steel, oil and gas markets that use sensors remain weak, but sensor orders for Europe's wind energy markets jumped during the third quarter.

"In spite of uncertainty and the timing of a real recovery, we continue our long-term investments in R&D and customer support for sensors and look forward to an eventual rebound in the global markets that we serve," Graves said.

Stronger-than-expected financial results overshadowed news earlier in the week that MTS agreed to settle with the U.S. attorney's office over an 18-month investigation into whether MTS had violated export rules on federal contracts.

Under the settlement, which needs final approval from the U.S. Department of Justice, MTS will pay $7.75 million but may resume contract work with federal, state and local governments. The settlement came one month after former CEO Laura Hamilton resigned without explanation.

Dee DePass • 612-673-7725

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