MTS Systems Corporation is a leading global supplier of test systems and industrial position sensors. The Company's testing hardware and software solutions help customers accelerate and improve their design, development, and manufacturing processes and are used for determining the mechanical behavior of materials, products, and structures. MTS' high-performance position sensors provide controls for a variety of industrial and vehicular applications. Mts Systems Corp. has a market cap of $434.4 million; its shares were traded at around $26.04 with a P/E ratio of 17.2 and P/S ratio of 1.1. The dividend yield of Mts Systems Corp. stocks is 2.3%. Mts Systems Corp. had an annual average earning growth of 8.5% over the past 10 years.
Highlight of Business Operations:In fiscal 2009, product orders in the Test segment ranged in value from a few hundred dollars to $7 million on an equivalent United States dollar basis. The average order size was approximately $100,000. The Test segment also markets services to customers on a per-call and contract basis, accounting for virtually all of the Companys Service Revenue in the Consolidated Statements of Income. Service orders in fiscal 2009 ranged from $100 to over $600,000 on a United States dollar-equivalent basis.
Sensors Segment: Sensors segment products are sold worldwide through a direct sales force as well as through independent distributors. The direct sales force is compensated through salary and commissions based upon revenue. The independent distributors pay the Company a wholesale price and re-sell the product to their customers. Sensors segment products are sold at unit prices ranging from $25 to $10,000, with an average sales price of approximately $500 on a United States dollar-equivalent basis. While the average sales cycle for the Sensors segment is approximately one to four weeks for existing customers purchasing standard products, the sales cycle for a new account can range from three months to two years.
Most of the Companys products are built to order. The Companys backlog of orders, defined as firm orders from customers that remain unfulfilled, totaled approximately $168 million, $235 million, and $205 million at October 3, 2009, September 27, 2008 and September 29, 2007, respectively. The majority of this backlog is related to the Test segment. Based on anticipated production schedules, the Company estimates that approximately $160 million of the backlog at October 3, 2009 will be converted to revenue during fiscal 2009. Delays may occur in the conversion of backlog into revenue as a result of export licensing compliance, technical difficulties, specification changes, manufacturing capacity, supplier issues, or access to the customer site to install the system. While the backlog is subject to order cancellations, the Company has not historically experienced a significant number of order cancellations.
The Company invests in significant product, system, and software application development. The Company also occasionally contracts with its customers to advance the state of technology and increase product functionality. Costs associated with R&D were expensed as incurred, totaling $16.3 million, $16.2 million and $19.3 million for the fiscal years ended October 3, 2009, September 27, 2008 and September 29, 2007, respectively. During the fiscal years ended October 3, 2009 and September 27, 2008, the Company allocated certain of its resources towards capitalized software development activities. Total software development costs capitalized during the fiscal years ended October 3, 2009 and September 27, 2008 were $3.9 million and $4.2 million, respectively.
Read the The complete ReportMTSC is in the portfolios of Bill Frels of MAIRS & POWER INC, Chuck Royce of ROYCE & ASSOCIATES, Richard Pzena of Pzena Investment Management LLC.