10-Q

United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
	FORM 10-Q

(Mark One)
x	Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended March 30, 2013
or
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________ to___________
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.)

	14000 Technology Drive, Eden Prairie, MN 55344
	(Address of principal executive offices)     (Zip Code)
Registrant’s telephone number, including area code: (952) 937-4000

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                                o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

x Yes                                o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer x Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

o Yes                                x No

The number of shares outstanding of each of the issuer’s classes of common stock as of May 3, 2013 was 15,808,560 shares.

MTS SYSTEMS CORPORATION

REPORT ON FORM 10-Q
FOR THE THREE AND SIX FISCAL MONTHS ENDED MARCH 30, 2013

INDEX

			Page No.
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Consolidated Balance Sheets as of March 30, 2013 and September 29, 2012	2
		Consolidated Statements of Income for the Three and Six Fiscal Months Ended March 30, 2013 and March 31, 2012	3
		Consolidated Statements of Comprehensive Income for the Three and Six Fiscal Months Ended March 30, 2013 and March 31, 2012	4
		Consolidated Statements of Cash Flows for the Six Fiscal Months Ended March 30, 2013 and March 31, 2012	5
		Condensed Notes to Consolidated Financial Statements	6 - 19
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20 - 34
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34 - 35
	Item 4.	Controls and Procedures	35
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	35
	Item 6.	Exhibits	36
SIGNATURES			36

1

PART 1 – FINANCIAL INFORMATION
Item 1. Financial Statements

MTS SYSTEMS CORPORATION
Consolidated Balance Sheets
(unaudited - in thousands, except share data)

	March 30, 2013		September 29, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	46,612	$	79,852
Accounts receivable, net of allowances for doubtful accounts of $1,915 and $2,247, respectively		104,732		84,119
Unbilled accounts receivable		57,634		51,306
Inventories		74,810		67,979
Prepaid expenses and other current assets		12,632		6,982
Deferred income taxes		9,846		10,665
Total current assets		306,266		300,903
Property and equipment, net		69,306		61,653
Goodwill		16,310		16,239
Other intangible assets, net		21,292		23,077
Other assets		4,312		4,696
Deferred income taxes		2,583		2,870
Total Assets	$	420,069	$	409,438
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current Liabilities:
Short-term borrowings	$	5,000	$	230
Accounts payable		28,748		33,744
Accrued payroll and related costs		25,931		30,731
Advance payments from customers		63,470		65,833
Accrued warranty costs		4,438		3,984
Accrued income taxes		2,712		3,510
Deferred income taxes		2,642		2,627
Other accrued liabilities		18,309		19,573
Total current liabilities		151,250		160,232
Deferred income taxes		8,670		8,671
Non-current accrued income taxes		2,019		1,666
Defined benefit pension plan obligation		7,753		7,761
Other long-term liabilities		3,521		4,389
Total Liabilities		173,213		182,719
Shareholders’ Investment:
Common stock, $0.25 par; 64,000 shares authorized: 15,760 and 15,640 shares issued and outstanding as of March 30, 2013 and September 29, 2012, respectively		3,940		3,910
Additional paid-in capital		6,727		652
Retained earnings		226,655		211,256
Accumulated other comprehensive income		9,534		10,901
Total Shareholders’ Investment		246,856		226,719
Total Liabilities and Shareholders’ Investment	$	420,069	$	409,438

The accompanying condensed notes to consolidated financial statements are an integral part of these statements.

2

MTS SYSTEMS CORPORATION
Consolidated Statements of Income
(unaudited - in thousands, except share and per share data)

	Three Fiscal Months Ended						Six Fiscal Months Ended
	March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
Revenue:
Product	$	119,793		$	112,788		$	244,414		$	230,239
Service		17,124			16,231			35,171			32,477
Total revenue		136,917			129,019			279,585			262,716
Cost of sales:
Product		73,559			64,648			149,519			131,520
Service		9,453			7,981			19,559			16,093
Total cost of sales		83,012			72,629			169,078			147,613
Gross profit		53,905			56,390			110,507			115,103
Operating expenses:
Selling and marketing		19,519			19,206			38,698			36,215
General and administrative		13,175			13,917			25,489			27,113
Research and development		5,588			6,068			10,640			11,027
Total operating expenses		38,282			39,191			74,827			74,355
Income from operations		15,623			17,199			35,680			40,748
Interest expense, net		(150	)		(212	)		(144	)		(418	)
Other expense, net		(954	)		(399	)		(502	)		(422	)
Income before income taxes		14,519			16,588			35,034			39,908
Provision for income taxes		3,458			5,431			10,190			13,212
Net income	$	11,061		$	11,157		$	24,844		$	26,696
Earnings per share:
Basic-
Earnings per share	$	0.70		$	0.70		$	1.58		$	1.69
Weighted average number of common shares outstanding - basic		15,723			15,906			15,696			15,793
Diluted-
Earnings per share	$	0.69		$	0.69		$	1.56		$	1.67
Weighted average number of common shares outstanding - diluted		15,928			16,106			15,887			15,969
Dividends declared per share	$	0.30		$	0.25		$	0.60		$	0.50

The accompanying condensed notes to consolidated financial statements are an integral part of these statements.

3

MTS SYSTEMS CORPORATION
Consolidated Statements of Comprehensive Income
(unaudited - in thousands)

	Three Fiscal Months Ended						Six Fiscal Months Ended
	March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
Net income	$	11,061		$	11,157		$	24,844		$	26,696
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(3,584	)		772			(3,383	)		(771	)
Derivative instruments:
Unrealized net gain (loss)		1,435			(120	)		2,239			125
Net (gain) loss reclassified to earnings		(581	)		(56	)		(480	)		307
Defined benefit pension plan:
Unrealized net (loss) gain		(122	)		(69	)		30			85
Net loss reclassified to earnings		91			14			181			28
Currency exchange rate change		180			(54	)		46			18
Other comprehensive (loss) income		(2,581	)		487			(1,367	)		(208	)
Comprehensive income	$	8,480		$	11,644		$	23,477		$	26,488

The accompanying condensed notes to consolidated financial statements are an integral part of these statements.

4

MTS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
(unaudited - in thousands)

	Six Fiscal Months Ended
	March 30, 2013			March 31, 2012
Cash flows from operating activities:
Net income	$	24,844		$	26,696
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		2,153			1,818
Excess tax benefits for stock-based compensation		(568	)		(648	)
Net periodic pension benefit cost		643			340
Depreciation and amortization		7,712			6,447
Deferred income taxes		932			131
Bad debt (recovery) provision		(239	)		758
Changes in operating assets and liabilities:
Accounts and unbilled contracts receivable		(29,155	)		(8,680	)
Inventories		(7,061	)		(4,484	)
Prepaid expenses		(2,144	)		(2,046	)
Accounts payable		(4,801	)		692
Accrued payroll and related costs		(3,443	)		(6,721	)
Advance payments from customers		(2,410	)		9,217
Accrued warranty costs		471			(799	)
Other assets and liabilities		(2,472	)		(3,152	)
Net cash (used in) provided by operating activities		(15,538	)		19,569
Cash flows from investing activities:
Purchases of property and equipment		(14,420	)		(6,703	)
Cash flows from financing activities:
Receipts under short-term borrowings		10,000			15
Payments under short-term borrowings		(5,283	)		-
Excess tax benefits from stock-based compensation		568			648
Cash dividends		(9,670	)		(7,950	)
Proceeds from exercise of stock options and employee stock purchase plan		3,403			13,950
Net cash (used in) provided by financing activities		(982	)		6,663
Effect of exchange rate on changes in cash		(2,300	)		(376	)
Net (decrease) increase in cash and cash equivalents		(33,240	)		19,153
Cash and cash equivalents, at beginning of period		79,852			104,095
Cash and cash equivalents, at end of period	$	46,612		$	123,248
Supplemental disclosure of cash flow information:
Cash paid during the period for -
Interest	$	36		$	523
Income taxes		12,383			17,304
Non-cash financing activities:
Dividends declared not yet paid	$	4,633		$	3,905

The accompanying condensed notes to consolidated financial statements are an integral part of these statements.

5

MTS SYSTEMS CORPORATION
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Basis of Presentation

The consolidated financial statements include the accounts of MTS Systems Corporation and its wholly owned subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated.

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished in these consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the Company to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations. The accompanying consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012 filed with the SEC. Interim results of operations for the three and six-fiscal month period ended March 30, 2013 are not necessarily indicative of the results to be expected for the full year.

Summary of Significant Accounting Policies

The Company believes that of its significant accounting policies, the following are particularly important to the portrayal of the Company’s results of operations and financial position and may require the application of a higher level of judgment by the Company’s management and, as a result, are subject to an inherent degree of uncertainty.

Revenue Recognition. The Company recognizes revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer has occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled.

Orders that are manufactured and delivered in less than six months with routine installations and no special acceptance protocols may contain multiple elements for revenue recognition purposes. The Company considers each deliverable that provides value to the customer on a standalone basis a separable element. Separable elements in these arrangements may include the design and manufacture of hardware and essential software, installation services, training and/or post contract software maintenance and support. The Company initially allocates consideration to each separable element using the relative selling price method. Selling prices are determined by the Company based on either vendor-specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, the Company’s best estimate of the selling price. Factors considered by the Company in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by the Company to provide the deliverable, as well as the Company’s historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training are not considered separable. Accordingly, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer.

Certain contractual arrangements require longer production periods, generally longer than six months (long-term contracts), and may contain non-routine installations and special acceptance protocols. These arrangements often include hardware and essential software, installation services, training and support. Long-term contractual arrangements involving essential software typically include significant production, modification, and customization. For long-term arrangements with essential software and all other long-term arrangements with complex installations and/or unusual acceptance protocols, revenue is recognized using the percentage-of-completion method, based on the cost incurred to-date relative to estimated total cost of the contract. Elements of an arrangement that do not separately fall within the scope of the percentage of completion method (e.g. training and post contract software maintenance and support) are recognized as the service is provided in amounts determined based on VSOE, or in the absence of VSOE, the Company’s best estimate of the selling price.

6

Under the terms of the Company’s long-term contracts, revenue recognized using the percentage-of-completion method may not, in certain circumstances, be invoiced until completion of contractual milestones, upon shipment of the equipment, or upon installation and acceptance by the customer. Unbilled amounts for these contracts appear in the Consolidated Balance Sheets as Unbilled Accounts Receivable.

Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. Revenue from post-contract software maintenance and support services is recognized ratably over the defined contractual period of the maintenance agreement.

The Company’s sales arrangements typically do not include specific performance-, cancellation-, termination-, or refund-type provisions. In the event a customer cancels a contractual arrangement, the Company would typically be entitled to receive reimbursement from the customer for actual costs incurred under the arrangement plus a reasonable margin.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant governmental authority.

Inventories. Inventories consist of material, labor and overhead costs and are stated at the lower of cost or market, determined under the first-in, first-out accounting method. Inventories at March 30, 2013 and September 29, 2012 were as follows:

	March 30, 2013		September 29, 2012
	(expressed in thousands)
Customer projects in various stages of completion	$	15,530	$	17,704
Components, assemblies and parts		59,280		50,275
Total	$	74,810	$	67,979

Software Development Costs. The Company capitalizes certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials and services, salary and benefits of the Company’s development and technical support staff, and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on the Company’s product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and the Company has established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product’s estimated economic life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition.

The Company’s capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value will be expensed in the period such a determination is made. Amortization expense for software development costs for the three-fiscal month periods ended March 30, 2013 and March 31, 2012 was $0.7 million and $0.7 million, respectively. Amortization expense for software development costs for the six-fiscal month periods ended March 30, 2013 and March 31, 2012 was $1.4 million and $1.2 million, respectively. See Note 3 in the Condensed Notes to Consolidated Financial Statements for additional information on capitalized software development costs.

7

Impairment of Long-Lived Assets. The Company reviews the carrying value of long-lived assets or asset groups, such as property and equipment and intangibles subject to amortization, when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. When this review indicates the carrying value of an asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group, the Company recognizes an asset impairment charge against operations. The amount of the impairment loss recorded is the amount by which the carrying value of the impaired asset or asset group exceeds its fair value.

Goodwill. Goodwill represents the excess of acquisition costs over the fair value of the net assets of businesses acquired. Goodwill is not amortized to income, but instead tested for impairment at least annually, during the fourth quarter of each fiscal year. Goodwill is also tested for impairment as changes in circumstances occur indicating that the carrying value may not be recoverable. Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired.

Warranty Obligations. Sales of the Company’s products and systems are subject to limited warranty obligations that are included in customer contracts. For sales that include installation services, warranty obligations typically extend for a period of twelve to twenty-four months from the date of either shipment or acceptance. Product obligations typically extend for a period of twelve to twenty-four months from the date of purchase. Under the terms of these warranties, the Company is obligated to repair or replace any components or assemblies it deems defective due to workmanship or materials. The Company reserves the right to reject warranty claims where it determines that failure is due to normal wear, customer modifications, improper maintenance, or misuse. The Company records general warranty provisions based on an estimated warranty expense percentage applied to current period revenue. The percentage applied reflects historical warranty claims experience over the preceding twelve-month period. Both the experience percentage and the warranty liability are evaluated on an ongoing basis for adequacy. In addition, warranty provisions are also recognized for certain nonrecurring product claims that are individually significant. Warranty provisions and claims for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 were as follows:

	Three Fiscal Months Ended						Six Fiscal Months Ended
	March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
	(expressed in thousands)
Beginning balance	$	4,423		$	4,595		$	3,984		$	5,290
Warranty provisions		1,454			1,094			3,146			1,483
Warranty claims		(1,544	)		(1,565	)		(2,826	)		(2,583	)
Adjustments to preexisting warranties		151			300			151			300
Currency translation		(46	)		44			(17	)		(22	)
Ending balance	$	4,438		$	4,468		$	4,438		$	4,468

Income Taxes. The Company records a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of its deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results. See Note 11 in the Condensed Notes to Consolidated Financial Statements for additional information on income taxes.

8

2. Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.” ASU No. 2011-08 amends Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and Other,” and provides an entity with the option of first performing a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after completion of the qualitative assessment, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value to the carrying amount of the reporting unit as described in ASC 350. Under the amendments in ASU No. 2011-08, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the first step of the two-step impairment test. The provisions of ASU No. 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption of ASU No. 2011-08 during the first quarter of fiscal year 2013 did not impact the Company’s financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU No. 2011-05 amends ASC Topic 220, “Comprehensive Income,” to allow an entity the option to present the components of net income and other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ investment. The amendments to the ASC in ASU No. 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220)” which deferred certain provisions of ASU No. 2011-05 that specifically relate to the presentation of separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income for all periods presented. With the exception of the specific provisions deferred under ASU No. 2011-12, the provisions of ASU No. 2011-05 are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. In the first quarter of fiscal year 2013, with the exception of the provisions specifically deferred under ASU No. 2011-12, the Company adopted the provisions of ASU No. 2011-05 and elected to present the components of net income and comprehensive income in two separate but consecutive statements. As a result, the Company included a new financial statement labeled “Consolidated Statements of Comprehensive Income.” The adoption of ASU No. 2011-05 did not affect the Company’s financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting Amounts Reclassified Out of Accumulated Comprehensive Income” which requires an entity to present, either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments to the ASC in ASU No. 2011-05 do not change the current requirements for reporting net income of other comprehensive income in the financial statements. The provisions of ASU No. 2013-02 are to be applied prospectively for reporting periods beginning after December 15, 2012. In the second quarter of fiscal year 2013, the Company adopted the provisions of ASU No. 2013-02 and elected to present significant amounts reclassified out of accumulated comprehensive income by the respective line items of net income in the Condensed Notes to the Consolidated Financial Statements. The adoption of ASU No. 2013-02 did not affect the Company’s financial position, results of operations or cash flows.

See Note 9 in the Condensed Notes to Consolidated Financial Statements for additional information on other comprehensive income and accumulated other comprehensive income.

9

3. Capital Assets

Property and Equipment
Property and equipment at March 30, 2013 and September 29, 2012 consist of the following:

	March 30, 2013			September 29, 2012
	(expressed in thousands)
Land and improvements	$	1,710		$	1,711
Buildings and improvements		53,574			53,545
Machinery and equipment		130,934			118,838
Total		186,218			174,094
Less accumulated depreciation		(116,912	)		(112,441	)
Property and equipment, net	$	69,306		$	61,653

Goodwill

Goodwill at March 30, 2013 and September 29, 2012 was $16.3 million and $16.2 million, respectively. The increase in goodwill during the six-fiscal month period ended March 30, 2013 was due to currency translation.

Other Intangible Assets
Other intangible assets at March 30, 2013 and September 29, 2012 consist of the following:

	March 30, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in Years)
	(dollar amounts expressed in thousands)
Software development costs	$	15,860	$	(7,504	)	$	8,356		5.7
Patents		10,126		(3,248	)		6,878		15.3
Trademarks and trade names		6,050		(1,128	)		4,922		30.2
Land-use rights		1,247		(111	)		1,136		47.8
Total	$	33,283	$	(11,991	)	$	21,292		14.3

	September 29, 2012
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value		Weighted Average Useful Life (in Years)
	(dollar amounts expressed in thousands)
Software development costs	$	15,860	$	(6,125	)	$	9,735		5.7
Patents		10,073		(2,871	)		7,202		15.3
Trademarks and trade names		6,020		(1,024	)		4,996		30.2
Land-use rights		1,241		(97	)		1,144		47.8
Total	$	33,194	$	(10,117	)	$	23,077		14.3

Amortization expense recognized during the three-fiscal month periods ended March 30, 2013 and March 31, 2012 was $0.9 million and $0.9 million, respectively. Amortization expense recognized during the six-fiscal month periods ended March 30, 2013 and March 31, 2012 was $1.9 million and $1.6 million, respectively.

4. Stock Purchases

During the fourth quarter of fiscal year 2012, the Company entered into an accelerated share purchase agreement with an unrelated third party investment bank. This forward contract is indexed to, and potentially settled in, the Company’s common stock. This forward contract meets the requirements of ASC 815-40 to be classified as permanent equity. In connection with the agreement, the Company made an initial $35.0 million payment to the investment bank and immediately received an initial delivery of approximately 0.5 million shares of its common stock with a fair value of $28.0 million as of the purchase date. Effective as of the date of the initial 0.5 million stock purchase, the transaction was accounted for as a share retirement, resulting in a reduction of common stock, additional paid-in capital and retained earnings of $0.1 million, $26.1 million and $1.8 million, respectively. The remaining $7.0 million of the Company’s initial payment to the investment bank was reported as a reduction in retained earnings. As long as the forward contract continues to meet the requirements to be classified as permanent equity, the Company will not record future changes in its fair value. The contract continued to meet those requirements as of March 30, 2013 and the Company expects it will continue to meet those requirements through the settlement date. The agreement expires in the third quarter of fiscal year 2013. Upon settlement of the contract, the Company will adjust common stock, as well as either additional paid-in capital or retained earnings, as appropriate, to reflect the final settlement amount.

10

The specific number of shares that the Company will ultimately purchase under the accelerated share purchase agreement will be based on the volume weighted average price (“VWAP”) of the Company’s common stock during the purchase period, less an agreed upon discount, unless such discounted VWAP were to fall below a specified floor price, in which case the floor price would be in effect. The maximum number of shares of common stock the Company can be required to issue to settle the agreement cannot exceed 2.0 million. At March 30, 2013, if the accelerated share purchase agreement had been settled on that date, the investment bank would have been required to deliver approximately 139,000 additional shares of the Company’s common stock. For every $1.00 increase or decrease in the Company’s VWAP, the settlement amount changes by approximately 12,000 shares.

5. Earnings Per Common Share

Basic earnings per share are computed by dividing net earnings by the daily weighted average number of common shares outstanding during the applicable periods. Diluted earnings per share include the potentially dilutive effect of common shares issued in connection with outstanding stock-based compensation awards, using the treasury stock method. Under the treasury stock method, shares associated with certain stock options have been excluded from the diluted weighted average shares outstanding calculation because the exercise of those options would lead to a net reduction in common shares outstanding. As a result, stock options to acquire less than 0.1 million weighted common shares have been excluded from diluted weighted shares outstanding for both the three-fiscal month periods ended March 30, 2013 and March 31, 2012, respectively. Stock options to acquire less than 0.1 million and 0.4 million weighted average common shares have been excluded from diluted weighted average shares outstanding for the six-month fiscal periods ended March 30, 2013 and March 31, 2012, respectively. The potentially dilutive effect of common shares issued in connection with outstanding stock options is determined based on net income. A reconciliation of these amounts is as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
	March 30, 2013		March 31, 2012		March 30, 2013		March 31, 2012
	(expressed in thousands, except per share data)
Net income	$	11,061	$	11,157	$	24,844	$	26,696
Weighted average common shares outstanding		15,723		15,906		15,696		15,793
Dilutive potential common shares		205		200		191		176
Total diluted weighted shares outstanding		15,928		16,106		15,887		15,969
Earnings per share:
Basic	$	0.70	$	0.70	$	1.58	$	1.69
Diluted	$	0.69	$	0.69	$	1.56	$	1.67

6. Business Segment Information

The Company’s Chief Executive Officer and management regularly review financial information for the Company’s two operating segments, “Test” and “Sensors.” Test provides testing equipment, systems, and services to the ground vehicles, materials and structures markets. Sensors provides high-performance position sensors for a variety of industrial and mobile hydraulic applications.

The accounting policies of the reportable segments are the same as those described in Note 1 to the Consolidated Financial Statements found in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012. In evaluating each segment’s performance, management focuses on income from operations. This measure excludes interest income and expense, income taxes and other non-operating items. Corporate expenses, including costs associated with various support functions such as human resources, information technology, finance and accounting, and general and administrative costs, are allocated to the reportable segments primarily on the basis of revenue.

11

Financial information by reportable segment for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
	March 30, 2013		March 31, 2012		March 30, 2013		March 31, 2012
	(expressed in thousands)
Revenue by Segment:
Test	$	113,943	$	102,913	$	235,046	$	211,541
Sensors		22,974		26,106		44,539		51,175
Total revenue	$	136,917	$	129,019	$	279,585	$	262,716
Income from Operations by Segment:
Test	$	12,006	$	10,694	$	28,397	$	28,467
Sensors		3,617		6,505		7,283		12,281
Total income from operations	$	15,623	$	17,199	$	35,680	$	40,748

7. Derivative Instruments and Hedging Activities

The Company’s results of operations could be materially impacted by changes in foreign currency exchange rates, as well as interest rates on its floating rate indebtedness. In an effort to manage exposure to these risks, the Company periodically enters into forward and option currency exchange contracts, interest rate swaps and forward interest rate swaps. Because the market value of these hedging contracts is derived from current market rates, they are classified as derivative financial instruments. The Company does not use derivatives for speculative or trading purposes. The derivative contracts contain credit risk to the extent that the Company’s bank counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality. For derivative instruments executed under master netting arrangements, the Company has the contractual right to offset fair value amounts recognized for the right to reclaim cash collateral with obligations to return cash collateral. The Company does not offset fair value amounts recognized on these derivative instruments. As of March 30, 2013, the Company does not have any foreign exchange contracts with credit-risk related contingent features.

The Company’s currency exchange contracts and interest rate swaps are designated as cash flow hedges and qualify as hedging instruments pursuant to ASC 815. The Company also has derivatives which are accounted for and reported under the guidance of ASC 830-20-10. Regardless of the designation for accounting purposes, the Company believes that all of its derivative instruments are hedges of transactional risk exposures. The fair value of the Company’s outstanding designated and undesignated derivative assets and liabilities are reported in the March 30, 2013 and September 29, 2012 Consolidated Balance Sheet as follows:

	March 30, 2013
	Prepaid Expenses and Other Current Assets		Other Accrued Liabilities
Designated hedge derivatives:	(expressed in thousands)
Foreign exchange cash flow hedges	$	2,002	$	116
Total designated hedge derivatives		2,002		116
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		53
Total hedge and other derivatives	$	2,002	$	169

12

	September 29, 2012
	Prepaid Expenses and Other Current Assets		Other Accrued Liabilities
Designated hedge derivatives:	(expressed in thousands)
Foreign exchange cash flow hedges	$	432	$	1,157
Total designated hedge derivatives		432		1,157
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		415
Total hedge and other derivatives	$	432	$	1,572

Cash Flow Hedging – Currency Risks
Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Qualifying gains and losses related to changes in the market value of these contracts are reported as a component of Accumulated Other Comprehensive Income (“AOCI”) within Shareholders’ Investment on the Consolidated Balance Sheets and reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effective portion of the cash flow hedges represents the change in fair value of the hedge that offsets the change in the functional currency value of the hedged item. Each month, the Company assesses whether its currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Subsequent changes in the market value of ineffective currency exchange contracts are recognized as an increase or decrease in Revenue on the Consolidated Statement of Income, because that is the same line item upon which the underlying hedged transaction is reported.

At March 30, 2013 and March 31, 2012, the Company had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $46.2 million and $37.0 million, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding were $42.8 million and $34.9 million at March 30, 2013 and March 31, 2012, respectively. At March 30, 2013 the net market value of the foreign currency exchange contracts was a net asset of $1.9 million, consisting of $2.0 million in assets and $0.1 million in liabilities. At March 31, 2012 the net market value of the foreign currency exchange contracts was a net liability of $0.1 million, consisting of $0.3 million in assets and $0.4 million in liabilities.

The pretax amounts recognized in AOCI on currency exchange contracts for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012, including gains and losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (“OCI”), are as follows:

	Three Fiscal Months Ended						Six Fiscal Months Ended
	March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
	(expressed in thousands)
Beginning unrealized net gain (loss) in AOCI	$	787		$	414		$	(648	)	$	(365	)
Net (gain) loss reclassified into Revenue (effective portion)		(920	)		(273	)		(760	)		129
Net gain (loss) recognized in OCI (effective portion)		2,271			(153	)		3,546			224
Ending unrealized net gain (loss) in AOCI	$	2,138		$	(12	)	$	2,138		$	(12	)

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was $0.1 million in each of the three and six-fiscal month periods ended March 30, 2013. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $0.1 million in each of the three and six-fiscal month periods ended March 31, 2012. At March 30, 2013 and March 31, 2012, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $2.1 million and a net loss of $0.1 million, respectively. The maximum remaining maturity of any forward or optional contract at March 30, 2013 and March 31, 2012 was 1.3 years and 2.3 years, respectively.

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Cash Flow Hedging - Interest Rate Risks
During the three and six-fiscal month periods ended March 31, 2012, the Company used floating to fixed interest rate swaps to mitigate its exposure to future changes in interest rates related to its floating rate indebtedness. The Company had designated these interest rate swap arrangements as cash flow hedges. As a result, changes in the fair value of the interest rate swaps were recorded in AOCI within Shareholders’ Investment on the Consolidated Balance Sheets throughout the entire contractual term of each of the interest rate swap arrangements. During the fiscal year ended September 29, 2012, the Company’s interest rate swap arrangements expired at various times from July 25, 2012 through September 28, 2012.

At March 31, 2012, the Company had outstanding interest rate swaps with total notional amounts of $40.0 million. During the six fiscal month period ended March 31, 2012, the Company paid fixed interest in exchange for interest received at monthly U.S. LIBOR. At March 31, 2012, the weighted-average interest rate payable by the Company under the terms of the credit facility borrowings and outstanding interest rate swaps was 2.09%. At March 31, 2012, there was a 45 basis-point differential between the variable rate interest paid by the Company on its outstanding credit facility borrowings and the variable rate interest received on the interest rate swaps. As a result of this differential, the overall effective interest rate applicable to outstanding credit facility borrowings, under the terms of the credit facility and interest rate swap agreements, was 2.54%.

The total market value of interest rate swaps at March 31, 2012 was a liability of $0.3 million. The pretax amounts recognized in AOCI on interest rate swaps for the three-fiscal month and six-fiscal month periods ended March 31, 2012 was as follows:

	Three Fiscal Months Ended March 31, 2012			Six Fiscal Months Ended March 31, 2012
	(expressed in thousands)
Beginning unrealized net loss in AOCI	$	(427	)	$	(617	)
Net loss reclassified into Interest expense (effective portion)		183			359
Net loss recognized in OCI (effective portion)		(38	)		(24	)
Ending unrealized net loss in AOCI	$	(282	)	$	(282	)

Foreign Currency Balance Sheet Derivatives
The Company also uses foreign currency derivative contracts to maintain the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these derivative contracts are included in Other Income (Expense), net on the Consolidated Statement of Income.

At March 30, 2013 and March 31, 2012, the Company had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $35.9 million and $38.1 million, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding at March 30, 2013 and March 31, 2012 was $11.3 million and $11.8 million, respectively. At March 30, 2013, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of less than $0.1 million. At March 31, 2012, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of less than $0.1 million.

14

The net losses and gains recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 are as follows:

	Three Fiscal Months Ended					Six Fiscal Months Ended
	March 30, 2013			March 31, 2012		March 30, 2013			March 31, 2012
	(expressed in thousands)
Net (loss) gain recognized in Other expense, net	$	(218	)	$	205	$	(272	)	$	199

8. Fair Value Measurements

In determining the fair value of financial assets and liabilities, the Company currently utilizes market data or other assumptions that it believes market participants would use in pricing the asset or liability in the principal or most advantageous market, and adjusts for non-performance and/or other risk associated with the Company as well as counterparties, as appropriate. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible to the Company at the measurement date.

Level 2 Inputs: Inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The hierarchy gives the highest priority to Level 1, because this level provides the most reliable measure of fair value, while giving the lowest priority to Level 3.

Financial Instruments Measured at Fair Value on a Recurring Basis
As of March 30, 2013 and September 29, 2012, financial assets and liabilities subject to fair value measurements on a recurring basis were as follows:

	March 30, 2013
		Level 1		Level 2		Level 3		Total
	(expressed in thousands)
Assets:
Currency contracts(1)	$	-	$	2,002	$	-	$	2,002
Total assets	$	-	$	2,002	$	-	$	2,002
Liabilities:
Currency contracts(1)	$	-	$	169	$	-	$	169
Total liabilities	$	-	$	169	$	-	$	169

	September 29, 2012
	Level 1		Level 2		Level 3		Total
	(expressed in thousands)
Assets:
Currency contracts(1)	$	-	$	432	$	-	$	432
Total assets	$	-	$	432	$	-	$	432
Liabilities:
Currency contracts(1)	$	-	$	1,572	$	-	$	1,572
Total liabilities	$	-	$	1,572	$	-	$	1,572

(1) Based on observable market transactions of spot currency rates and forward currency rates on equivalently-termed instruments.

15

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s goodwill, intangible assets and other long-lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially, and are currently, measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Periodically, these nonfinancial assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these nonfinancial assets were to become impaired, the Company would recognize an impairment loss equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. Fair value measurements of reporting units are estimated using an income approach involving discounted or undiscounted cash flow models that contain certain Level 3 inputs requiring management judgment, including projections of economic conditions and customer demand, revenue and margins, changes in competition, operating costs, working capital requirements, and new product introductions. Fair value measurements of the reporting units associated with the Company’s goodwill balances are estimated at least annually in the fourth quarter of each fiscal year for purposes of impairment testing. Fair value measurements associated with the Company’s intangible assets and other long-lived assets are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable.

Financial Instruments not Measured at Fair Value
Certain of the Company’s financial instruments are not measured at fair value but nevertheless are recorded at carrying amounts approximating fair value, based on their short-term nature or variable interest rate. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings.

9. Other Comprehensive Income

Other Comprehensive Income, a component of Shareholders’ Investment, consists of foreign currency translation adjustments, gains or losses on derivative instruments, and defined benefit pension plan adjustments.

Income tax expense or benefit allocated to each component of other comprehensive income (loss) for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

	March 30, 2013
	Three Fiscal Months Ended									Six Fiscal Months Ended
	Pretax Amount			Tax (Expense) or Benefit			Net of Tax Amount			Pretax Amount			Tax (Expense) or Benefit			Net of Tax Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	(3,584	)	$	-		$	(3,584	)	$	(3,383	)	$	-		$	(3,383	)
Derivative instruments:
Unrealized net gain		2,270			(835	)		1,435			3,545			(1,306	)		2,239
Net gain reclassified to earnings		(920	)		339			(581	)		(760	)		280			(480	)
Defined benefit pension plan:
Unrealized net (loss) gain		(174	)		52			(122	)		43			(13	)		30
Net loss reclassified to earnings		132			(41	)		91			260			(79	)		181
Currency exchange rate change		180			-			180			46			-			46
Other comprehensive loss	$	(2,096	)	$	(485	)	$	(2,581	)	$	(249	)	$	(1,118	)	$	(1,367	)

	March 31, 2012
	Three Fiscal Months Ended									Six Fiscal Months Ended
	Pretax Amount			Tax (Expense) or Benefit			Net of Tax Amount			Pretax Amount			Tax (Expense) or Benefit			Net of Tax Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	772		$	-		$	772		$	(771	)	$	-		$	(771	)
Derivative instruments:
Unrealized net (loss) gain		(192	)		72			(120	)		198			(73	)		125
Net (gain) loss reclassified to earnings		(90	)		34			(56	)		488			(181	)		307
Defined benefit pension plan:
Unrealized net (loss) gain		(122	)		53			(69	)		130			(45	)		85
Net loss reclassified to earnings		20			(6	)		14			40			(12	)		28
Currency exchange rate change		(54	)		-			(54	)		18			-			18
Other comprehensive income	$	334		$	153		$	487		$	103		$	(311	)	$	(208	)

16

The changes in the net-of-tax balances of each component of AOCI during the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 were as follows:

	March 30, 2013
	Three Fiscal Months Ended												Six Fiscal Months Ended
	Foreign Currency Translation Adjustments			Unrealized Gain on Derivative Instruments			Defined Benefit Pension Plan Adjustments			Total			Foreign Currency Translation Adjustments			Unrealized (Loss) Gain on Derivative Instruments			Defined Benefit Pension Plan Adjustments			Total
	(expressed in thousands )
Beginning balance	$	16,935		$	497		$	(5,317	)	$	12,115		$	16,734		$	(408	)	$	(5,425	)	$	10,901
Other comprehensive loss before reclassifications		(3,584	)		1,435			58			(2,091	)		(3,383	)		2,239			76			(1,068	)
Amounts reclassified to earnings		-			(581	)		91			(490	)		-			(480	)		181			(299	)
Other comprehensive loss		(3,584	)		854			149			(2,581	)		(3,383	)		1,759			257			(1,367	)
Ending balance	$	13,351		$	1,351		$	(5,168	)	$	9,534		$	13,351		$	1,351		$	(5,168	)	$	9,534

	March 31, 2012
	Three Fiscal Months Ended											Six Fiscal Months Ended
	Foreign Currency Translation Adjustments		Unrealized Loss on Derivative Instruments			Defined Benefit Pension Plan Adjustments			Total			Foreign Currency Translation Adjustments			Unrealized Loss on Derivative Instruments			Defined Benefit Pension Plan Adjustments			Total
	(expressed in thousands )
Beginning balance	$	17,314	$	(8	)	$	(1,712	)	$	15,594		$	18,857		$	(616	)	$	(1,952	)	$	16,289
Other comprehensive income (loss) before reclassifications		772		(120	)		(123	)		529			(771	)		125			103			(543	)
Amounts reclassified to earnings		-		(56	)		14			(42	)		-			307			28			335
Other comprehensive income (loss)		772		(176	)		(109	)		487			(771	)		432			131			(208	)
Ending balance	$	18,086	$	(184	)	$	(1,821	)	$	16,081		$	18,086		$	(184	)	$	(1,821	)	$	16,081

17

The effect on certain line items in the Consolidated Statements of Income of amounts reclassified out of AOCI for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

	Three Fiscal Months Ended						Six Fiscal Months Ended						Affected Line Item in the Consolidated Statements of Income
	March 30, 2013				March 31, 2012		March 30, 2013			March 31, 2012
Derivative instruments:		(expressed in thousands)
Currency exchange contracts	$	920		$	273		$	760		$	(129	)	Revenue
Interest rate swaps		-			(183	)		-			(359	)	Interest expense, net
Total net gains (losses) included in income before income taxes		920			90			760			(488	)
Income tax (expense) benefit		(339	)		(34	)		(280	)		181
Total net gains (losses) included in net income		581			56			480			(307	)
Defined benefit pension plan:
Actuarial losses		(44	)		(7	)		(85	)		(13	)	Cost of sales
Actuarial losses		(39	)		(6	)		(78	)		(12	)	Selling and marketing
Actuarial losses		(49	)		(7	)		(97	)		(15	)	General and administrative
Total losses included in income before income taxes		(132	)		(20	)		(260	)		(40	)
Income tax expense		41			6			79			12
Total net losses included in net income		(91	)		(14	)		(181	)		(28	)
Total net-of-tax reclassifications out of accumulated other comprehensive income included in net income	$	490		$	42		$	299		$	(335	)

10. Financing

Short-term borrowings at March 30, 2013 and September 29, 2012 consist of the following:

	March 30, 2013		September 29, 2012
	(expressed in thousands)
Bank line of credit, swing line loan (3.25% rate in effect at March 30, 2013), maturing September 2017	$	5,000	$	-
Notes payable, non-interest bearing		-		230
Total short-term borrowings	$	5,000	$	230

The Company’s credit facility provides for up to $100 million for working capital financing, acquisitions, share purchases, or other general corporate purposes and expires in September 2017. At March 30, 2013 outstanding borrowings under the credit facility were $5.0 million. At March 30, 2013, under the terms of the credit facility borrowings, the fixed interest rate applicable to outstanding credit facility borrowings was 3.25%. At September 29, 2012, the Company had no borrowings outstanding under the $100 million credit facility. Short-term borrowings at September 29, 2012 consisted of non-interest bearing notes payable to vendors by the Company’s Japanese Sensors’ subsidiary. At March 30, 2013, the Company had outstanding letters of credit drawn from the credit facility totaling $10.7 million, leaving $84.3 million of unused borrowing capacity. At September 29, 2012, the Company had outstanding letters of credit drawn from the credit facility totaling $10.1 million, leaving $89.9 million of unused borrowing capacity.

11. Income Taxes

As of March 30, 2013, the Company’s liability for unrecognized tax benefits was $2.0 million, of which $0.8 million would favorably affect the Company’s effective tax rate if recognized. At September 29, 2012, the Company’s liability for unrecognized tax benefits was $1.7 million, of which $0.5 million would favorably affect the Company’s effective tax rate, if recognized. As of March 30, 2013, the Company does not expect significant changes in the amount of unrecognized tax benefits during the next twelve months.

On January 2, 2013, the American Taxpayer Relief Act of 2012 (Act) was signed into law. The Act includes legislation that reinstated the United States Research and Development (R&D) tax credit retroactively from January 1, 2012 and extends it through December 31, 2013. As a result of this legislation, the Company recognized a tax benefit of approximately $1.3 million during the second quarter of fiscal year 2013.

18

12. Retirement Benefit Plan

One of the Company’s German subsidiaries has a non-contributory, defined benefit retirement plan for eligible employees. This plan provides benefits based on the employee’s years of service and compensation during the years immediately preceding retirement, early retirement, termination, disability, or death, as defined in the plan.

The cost for the plan for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 included the following components:

	Three Fiscal Months Ended						Six Fiscal Months Ended
		March 30, 2013			March 31, 2012			March 30, 2013			March 31, 2012
	(expressed in thousands)
Service cost	$	174		$	104		$	344		$	211
Interest cost		194			211			384			427
Expected return on plan assets		(175	)		(167	)		(345	)		(338	)
Net amortization and deferral		132			20			260			40
Net periodic benefit cost	$	325		$	168		$	643		$	340

The weighted average expected long-term rate of return on plan assets used to determine the net periodic benefit cost for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was 5.2% and 5.4%, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” regarding financial projections made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from historical results and those presently anticipated or projected. Words such as “may,” “will,” “should,” “expects,” “intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates,” and similar expressions are used to identify these forward-looking statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those factors described in Part I, Item 1A, “Risk Factors” of our 2012 Form 10-K. Such important factors include:

• The Company’s business operations may be affected by government contracting risks

• The Company’s business is significantly international in scope, which poses multiple risks including, but not limited to: currency value fluctuations; difficulty enforcing agreements and collecting receivables; import and export matters; higher danger of terrorist activity; difficulty in staffing; and compliance with laws

• Volatility in the global economy could adversely affect results

• The Company’s business is subject to strong competition

• The Company may not achieve its growth plans for the expansion of the business because the Company’s long-term success depends on its ability to expand its business through new product development, mergers and acquisitions, geographic expansion, and service offerings, all of which are subject to inherent risks including, but not limited to: market demand; market acceptance of products; and the Company’s ability to advance its technology

• The Company may experience difficulties obtaining the services of skilled employees

• The Company may fail to protect its intellectual property effectively, or may infringe upon the intellectual property of others

• The business could be adversely affected by product liability and commercial litigation

• The Company may experience difficulty obtaining materials or components for its products, or the cost of materials or components may increase

• Government regulation imposes significant costs and other constraints

• The backlog, sales, delivery and acceptance cycle for many of the Company’s products is irregular and may not develop as anticipated

• The Company’s customers are in cyclical industries

• Interest rate fluctuations could adversely affect results

• The Company may be required to recognize impairment charges for long-lived assets

• The Company will need to begin disclosing its use of “conflict minerals,” which will impose costs on the Company and could raise reputational and other risks

The performance of the Company’s business and its securities may be adversely affected by these factors and by other factors common to other businesses and investments, or to the general economy. Forward-looking statements are qualified by some or all of these risk factors. Therefore, you should consider these risk factors with caution and form your own critical and independent conclusions about the likely effect of these risk factors on our future performance. Forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made to reflect the occurrence of unanticipated events or circumstances. Readers should carefully review the disclosures and the risk factors described in this and other documents we file from time to time with the SEC, including our reports on Forms 10-Q and 8-K to be filed by the Company in fiscal year 2013.

About MTS Systems Corporation

MTS Systems Corporation is a leading global supplier of high-performance test systems and 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 had 2,147 employees and revenue of $542 million for the fiscal year ended September 29, 2012.

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Financial Results

Total Company

Orders and Backlog

Three Fiscal Months Ended March 30, 2013 (“Second Quarter of Fiscal 2013”) Compared to Three Fiscal Months Ended March 31, 2012 (“Second Quarter of Fiscal 2012”)

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 orders, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013		Estimated					Three Fiscal Months Ended March 31, 2012
			Business Change		Currency Translation
Orders	$	137.7	$	4.2	$	(2.1	)	$	135.6

Orders totaled $137.7 million, an increase of $2.1 million, or 1.5%, including an estimated 1.5% unfavorable impact of currency translation, compared to orders of $135.6 million for the Second Quarter of Fiscal 2012. Orders in both the current quarter and prior year included one large (in excess of $5.0 million) custom Test segment (“Test”) order of approximately $5 million. Test orders grew 3.5% while Sensors segment (“Sensors”) orders declined 6.6%.

Backlog of undelivered orders at the end of the quarter was $287.3 million, a decrease of 2.4% compared to backlog of $294.4 million at the end of the Second Quarter of Fiscal 2012. While the Company’s backlog is subject to order cancellations, the Company has not historically experienced a significant number of order cancellations. Second Quarter of Fiscal 2013 beginning backlog was unfavorably impacted by a custom order in Test totaling approximately $2.1 million that was cancelled during the First Quarter of Fiscal 2013. This order was booked in the previous fiscal year.

Results of Operations

Second Quarter of Fiscal 2013 Compared to Second Quarter of Fiscal 2012

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 statements of operations (in millions, except per share data):

	Three Fiscal Months Ended
	March 30, 2013			March 31, 2012			Variance			% Variance
Revenue	$	136.9		$	129.0		$	7.9			6.1	%
Cost of sales		83.0			72.6			10.4			14.3	%
Gross profit		53.9			56.4			(2.5	)		-4.4	%
Gross margin		39.4	%		43.7	%		(4.3	) pts
Operating expenses:
Selling and marketing		19.5			19.2			0.3			1.6	%
General administrative		13.2			13.9			(0.7	)		-5.0	%
Research and development		5.6			6.1			(0.5	)		-8.2	%
Total operating expenses		38.3			39.2			(0.9	)		-2.3	%
Income from operations		15.6			17.2			(1.6	)		-9.3	%
Interest expense, net		(0.2	)		(0.2	)		-			0.0	%
Other expense, net		(0.9	)		(0.4	)		(0.5	)		125.0	%
Income before income taxes		14.5			16.6			(2.1	)		-12.7	%
Income tax provision		3.4			5.4			(2.0	)		-37.0	%
Net income	$	11.1		$	11.2		$	(0.1	)		-0.9	%
Diluted earnings per share	$	0.69		$	0.69		$	-			0.0	%

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The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 results of operations, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013			Estimated						Three Fiscal Months Ended March 31, 2012
				Business Change			Currency Translation
Revenue	$	136.9		$	10.1		$	(2.2	)	$	129.0
Cost of sales		83.0			12.0			(1.6	)		72.6
Gross profit		53.9			(1.9	)		(0.6	)		56.4
		39.4	%								43.7	%
Operating expenses:
Selling and marketing		19.5			0.5			(0.2	)		19.2
General administrative		13.2			(0.6	)		(0.1	)		13.9
Research and development		5.6			(0.5	)		-			6.1
Total operating expenses		38.3			(0.6	)		(0.3	)		39.2
Income from operations	$	15.6		$	(1.3	)	$	(0.3	)	$	17.2

Revenue was $136.9 million, an increase of $7.9 million, or 6.1%, compared to revenue of $129.0 million for the Second Quarter of Fiscal 2012. The increase was primarily driven by strong backlog execution in Test, partially offset by a lower beginning backlog and reduced order volume in Sensors, as well as an estimated $2.2 million unfavorable impact of currency translation. Test revenue increased 10.7% to $113.9 million, while Sensors revenue decreased 11.9% to $23.0 million.

Gross profit was $53.9 million, a decrease of $2.5 million, or 4.4%, compared to gross profit of $56.4 million for the Second Quarter of Fiscal 2012. Gross profit as a percentage of revenue was 39.4%, a decrease of 4.3 percentage points from 43.7% for the Second Quarter of Fiscal 2012. This decrease reflects unfavorable mix, resulting from an 11.9% reduction in higher-margin Sensors revenue, as well as a higher proportion of lower-margin custom development products in Test. The gross profit rate was also negatively impacted by approximately 1 percentage point from continued investment in productivity and infrastructure initiatives in Test, as well as 1 percentage point from lower engineering labor utilization in Test. These decreases were partially offset by volume leverage in Test. The productivity and infrastructure initiatives are focused on the building of a scalable enterprise and include investments in the Company’s operating system, selling process, and service delivery system. These investments will likely continue for the remainder of fiscal year 2013 and into fiscal year 2014.

Selling and marketing expense was $19.5 million, an increase of $0.3 million, or 1.6%, compared to $19.2 million for the Second Quarter of Fiscal 2012. This increase was primarily due to increased spending on marketing initiatives, travel and other discretionary spending to support selling efforts, partially offset by lower sales commissions and reduced bad debt expense. Selling and marketing expense as a percentage of revenue was 14.2% on higher volume, compared to 14.9% for the Second Quarter of Fiscal 2012.

General and administrative expense was $13.2 million, a decrease of $0.7 million, or 5.0%, compared to $13.9 million for the Second Quarter of Fiscal 2012. This decrease is primarily driven by a lower level of investment in strategic and compliance initiatives compared to the Second Quarter of Fiscal 2012, partially offset by higher compensation and benefits driven by senior management transition-related expenses in Sensors of $0.5 million as well as increased headcount in Test. General and administrative expense as a percentage of revenue was 9.6%, compared to 10.8% for the Second Quarter of Fiscal 2012.

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Research and development expense was $5.6 million, a decrease of $0.5 million, or 8.2%, compared to $6.1 million for the Second Quarter of Fiscal 2012, primarily due to timing of planned expenditures in Test. Research and development expense as a percentage of revenue was 4.1%, compared to 4.7% for the Second Quarter of Fiscal 2012.

Income from operations was $15.6 million, a decrease of $1.6 million, or 9.3%, compared to income from operations of $17.2 million for the Second Quarter of Fiscal 2012. This decrease was driven by lower gross profit, partially offset by decreased operating expenses. Operating income as a percentage of revenue was 11.4%, compared to 13.3% for the Second Quarter of Fiscal 2012.

Interest expense, net was $0.2 million, relatively flat compared to the Second Quarter of Fiscal 2012.

Other expense, net was $0.9 million, an increase of $0.5 million, or 125.0%, compared to $0.4 million in the Second Quarter of Fiscal 2012. This increase was primarily due to $0.6 million increased net losses on foreign currency transactions driven by volatility in the value of the U.S. dollar against the Japanese Yen during Second Quarter of Fiscal 2013.

Provision for income taxes totaled $3.4 million for the Second Quarter of Fiscal 2013, a decrease of $2.0 million, or 37.0%, compared to $5.4 million for the Second Quarter of Fiscal 2012, primarily due to a lower effective tax rate as well as decreased income before income taxes. The effective tax rate for the Second Quarter of Fiscal 2013 was 23.8%, a decrease of 8.9 percentage points compared to a tax rate of 32.7% for the Second Quarter of Fiscal 2012. This decrease was primarily due to the enactment of tax legislation in the Second Quarter of Fiscal 2013 that retroactively extended the United States research and development tax credit and resulted in a tax benefit of $1.3 million.

Net income was $11.1 million, relatively flat compared to $11.2 million for the Second Quarter of Fiscal 2012, as lower income from operations and increased net losses on foreign currency transactions was substantially offset by a decrease in the effective tax rate. Earnings per diluted share were $0.69, flat compared to the Second Quarter of Fiscal 2012.

Segment Results

Test Segment

Orders and Backlog

Second Quarter of Fiscal 2013 Compared to Second Quarter of Fiscal 2012

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 orders for Test, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013		Estimated					Three Fiscal Months Ended March 31, 2012
			Business Change		Currency Translation
Orders	$	113.7	$	5.2	$	(1.4	)	$	109.9

Orders totaled $113.7 million, an increase of $3.8 million, or 3.5%, compared to orders of $109.9 million for the Second Quarter of Fiscal 2012. Orders in both the Second Quarter of Fiscal 2013 and Fiscal 2012 included a $5 million European order in the ground vehicles market. Geographically, Asia grew 16.4% and the Americas increased 0.8%, driven by growth in base orders (those under $5.0 million) in the ground vehicles market. Europe declined 10.8%, primarily driven by timing of wind energy orders in the structures market, partially offset by growth in service orders. Currency translation unfavorably impacted orders by approximately $1.4 million. Test accounted for 82.6% of total Company orders, compared to 81.0% for the Second Quarter of Fiscal 2012.

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Backlog of undelivered orders at the end of the quarter was $271.6 million, a decrease of 2.5% compared backlog of $278.6 million at the end of the Second Quarter of Fiscal 2012. As previously mentioned, Second Quarter of Fiscal 2013 beginning backlog was negatively impacted by a custom order totaling approximately $2.1 million that was cancelled during the First Quarter of Fiscal 2013.

Results of Operations

Second Quarter of Fiscal 2013 Compared to Second Quarter of Fiscal 2012

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 results of operations for Test, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013			Estimated						Three Fiscal Months Ended March 31, 2012
				Business Change			Currency Translation
Revenue	$	113.9		$	12.7		$	(1.7	)	$	102.9
Cost of sales		72.6			12.5			(1.4	)		61.5
Gross profit		41.3			0.2			(0.3	)		41.4
		36.3	%								40.2	%
Operating expenses:
Selling and marketing		15.5			0.2			(0.1	)		15.4
General administrative		9.6			(0.9	)		-			10.5
Research and development		4.2			(0.6	)		-			4.8
Total operating expenses		29.3			(1.3	)		(0.1	)		30.7
Income from operations	$	12.0		$	1.5		$	(0.2	)	$	10.7

Revenue was $113.9 million, an increase of $11.0 million, or 10.7%, compared to revenue of $102.9 million for the Second Quarter of Fiscal 2012. The increase was primarily driven by strong backlog execution, partially offset by an estimated $1.7 million unfavorable impact of currency translation. The backlog conversion rate benefited from the implementation of operational process improvements. These improvements include the implementation of project scheduling and sales and operations planning processes which are used to forecast and schedule engineering and manufacturing labor requirements based on planned future sales.

Gross profit was $41.3 million, relatively flat compared to the Second Quarter of Fiscal 2012. Gross profit as a percentage of revenue was 36.3%, a decrease of 3.9 percentage points from 40.2% for the Second Quarter of Fiscal 2012. Of the reduced gross profit rate, approximately 3 percentage points resulted from an unfavorable mix of lower-margin projects, 1 percentage point resulted from continued investment in productivity and infrastructure initiatives, and 1 percentage point resulted from lower engineering labor utilization caused primarily by increased innovation and training initiatives during the quarter. These decreases were partially offset by leverage on higher volume. As previously mentioned, the productivity and infrastructure initiatives are focused on the building of a scalable enterprise and include investments in the Company’s operating system, selling process, and service delivery system. These investments will likely continue for the remainder of fiscal year 2013 and into fiscal year 2014.

Selling and marketing expense was $15.5 million, relatively flat compared to the Second Quarter of Fiscal 2012. Continued investment in sales expansion to drive future revenue growth, primarily comprised of higher compensation and benefits resulting from increased headcount, as well as increased travel and other discretionary expenses to support current sales efforts, was largely offset by lower sales commissions, severance charges of $0.6 million recognized in the Second Quarter of Fiscal 2012, and reduced bad debt expense. Selling and marketing expense as a percentage of revenue was 13.6% on higher volume, compared to 15.0% for the Second Quarter of Fiscal 2012.

General and administrative expense was $9.6 million, a decrease of $0.9 million, or 8.6%, compared to $10.5 million for the Second Quarter of Fiscal 2012. This decrease is primarily driven by a lower level of investment in strategic and compliance initiatives. General and administrative expense as a percentage of revenue was 8.4%, compared to 10.2% for the Second Quarter of Fiscal 2012.

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Research and development expense was $4.2 million, a decrease of $0.6 million, or 12.5%, compared to $4.8 million for the Second Quarter of Fiscal 2012, due to the timing of planned expenditures. Research and development expense as a percentage of revenue was 3.7%, compared to 4.7% for the Second Quarter of Fiscal 2012.

Income from operations was $12.0 million, an increase of $1.3 million, or 12.1%, compared to income from operations of $10.7 million for the Second Quarter of Fiscal 2012, primarily driven by decreased operating expenses. Operating income as a percentage of revenue was 10.5%, compared to 10.4% for the Second Quarter of Fiscal 2012.

Sensors Segment

Orders and Backlog

Second Quarter of Fiscal 2013 Compared to Second Quarter of Fiscal 2012

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 orders for Sensors, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013		Estimated						Three Fiscal Months Ended March 31, 2012
			Business Change			Currency Translation
Orders	$	24.0	$	(1.0	)	$	(0.7	)	$	25.7

Orders totaled $24.0 million, a decrease of $1.7 million, or 6.6%, including an estimated 2.7% unfavorable impact of currency translation, compared to orders of $25.7 million for the Second Quarter of Fiscal 2012. The industrial market was down modestly at 4.0%, primarily driven by weaker demand in the plastics and steel markets in Asia. The mobile hydraulic market was down 15.9%, primarily driven by Original Equipment Manufacturers reducing their inventory levels in response to lower demand in the Americas and Europe. Sensors accounted for 17.4% of total Company orders, compared to 19.0% for the Second Quarter of Fiscal 2012.

Backlog of undelivered orders at the end of the quarter was $15.7 million, relatively flat compared to backlog of $15.8 million at the end of the Second Quarter of Fiscal 2012.

Results of Operations

Second Quarter of Fiscal 2013 Compared to Second Quarter of Fiscal 2012

The following is a comparison of Second Quarter of Fiscal 2013 and Second Quarter of Fiscal 2012 results of operations for Sensors, separately identifying the estimated impact of currency translation (in millions):

	Three Fiscal Months Ended March 30, 2013			Estimated						Three Fiscal Months Ended March 31, 2012
				Business Change			Currency Translation
Revenue	$	23.0		$	(2.6	)	$	(0.5	)	$	26.1
Cost of sales		10.4			(0.5	)		(0.2	)		11.1
Gross profit		12.6			(2.1	)		(0.3	)		15.0
		54.8	%								57.4	%
Operating expenses:
Selling and marketing		4.0			0.3			(0.1	)		3.8
General administrative		3.6			0.3			(0.1	)		3.4
Research and development		1.4			0.1			-			1.3
Total operating expenses		9.0			0.7			(0.2	)		8.5
Income from operations	$	3.6		$	(2.8	)	$	(0.1	)	$	6.5

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Revenue was $23.0 million, a decrease of $3.1 million, or 11.9%, compared to revenue of $26.1 million for the Second Quarter of Fiscal 2012. This decrease was primarily driven by lower order volume, as well as an estimated $0.5 million unfavorable impact of currency translation.

Gross profit was $12.6 million, a decrease of $2.4 million, or 16.0%, compared to gross profit of $15.0 million for the Second Quarter of Fiscal 2012, driven by lower revenue volume. Gross profit as a percentage of revenue was 54.8%, a decrease of 2.6 percentage points from 57.4% for the Second Quarter of Fiscal 2012, driven by reduced leverage on lower volume.

Selling and marketing expense was $4.0 million, an increase of $0.2 million, or 5.3%, compared to $3.8 million for the Second Quarter of Fiscal 2012. The increase was primarily due to higher compensation and benefits driven by increased headcount to support future sales growth. Selling and marketing expense as a percentage of revenue was 17.4%, compared to 14.6% for the Second Quarter of Fiscal 2012.

General and administrative expense was $3.6 million, an increase of $0.2 million, or 5.9%, compared to $3.4 million for the Second Quarter of Fiscal 2012. This increase is primarily driven by $0.5 million higher compensation and benefits for senior management transition-related expenses, partially offset by a lower level of investment in strategic and compliance initiatives. General and administrative expense as a percentage of revenue was 15.7%, compared to 13.0% for the Second Quarter of Fiscal 2012.

Research and development expense was $1.4 million, relatively flat compared to the Second Quarter of Fiscal 2012. Research and development expense as a percentage of revenue was 6.1%, compared to 5.0% for the Second Quarter of Fiscal 2012.

Income from operations was $3.6 million, a decrease of $2.9 million, or 44.6%, compared to income from operations of $6.5 million for the Second Quarter of Fiscal 2012. The decrease was primarily due to lower gross profit and higher operating expenses. Operating income as a percentage of revenue was 15.7%, compared to 24.9% for the Second Quarter of Fiscal 2012.

Financial Results

Total Company

Orders and Backlog

Six Fiscal Months Ended March 30, 2013 (“First Half of Fiscal 2013”) Compared to Six Fiscal Months Ended March 31, 2012 (“First Half of Fiscal 2012”)

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 orders, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013		Estimated					Six Fiscal Months Ended March 31, 2012
			Business Change		Currency Translation
Orders	$	277.0	$	10.0	$	(3.5	)	$	270.5

Orders totaled $277.0 million, an increase of $6.5 million, or 2.4%, including an estimated 2.6% unfavorable impact of currency translation, compared to orders of $270.5 million for the First Half of Fiscal 2012. This increase was driven by three large (in excess of $5.0 million) custom Test segment (“Test”) orders totaling approximately $26 million. There was one large custom Test segment order of approximately $5 million in the First Half of Fiscal 2012. Test orders grew 4.4% while Sensors segment (“Sensors”) orders declined 6.4%.

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Backlog of undelivered orders at the end of the period was $287.3 million, compared to backlog of $294.4 million at the end of the First Half of Fiscal 2012.

Results of Operations

First Half of Fiscal 2013 Compared to First Half of Fiscal 2012

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 statements of operations (in millions, except per share data):

	Six Fiscal Months Ended
	March 30, 2013			March 31, 2012			Variance			% Variance
Revenue	$	279.6		$	262.7		$	16.9			6.4	%
Cost of sales		169.1			147.6			21.5			14.6	%
Gross profit		110.5			115.1			(4.6	)		-4.0	%
Gross margin		39.5	%		43.8	%		(4.3	) pts
Operating expenses:
Selling and marketing		38.7			36.2			2.5			6.9	%
General administrative		25.5			27.1			(1.6	)		-5.9	%
Research and development		10.6			11.1			(0.5	)		-4.5	%
Total operating expenses		74.8			74.4			0.4			0.5	%
Income from operations		35.7			40.7			(5.0	)		-12.3	%
Interest expense, net		(0.2	)		(0.4	)		0.2			-50.0	%
Other expense, net		(0.5	)		(0.4	)		(0.1	)		25.0	%
Income before income taxes		35.0			39.9			(4.9	)		-12.3	%
Income tax provision		10.2			13.2			(3.0	)		-22.7	%
Net income	$	24.8		$	26.7		$	(1.9	)		-7.1	%
Diluted earnings per share	$	1.56		$	1.67		$	(0.11	)		-6.6	%

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 results of operations, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013			Estimated						Six Fiscal Months Ended March 31, 2012
				Business Change			Currency Translation
Revenue	$	279.6		$	20.9		$	(4.0	)	$	262.7
Cost of sales		169.1			24.2			(2.7	)		147.6
Gross profit		110.5			(3.3	)		(1.3	)		115.1
		39.5	%								43.8	%
Operating expenses:
Selling and marketing		38.7			3.0			(0.5	)		36.2
General administrative		25.5			(1.4	)		(0.2	)		27.1
Research and development		10.6			(0.5	)		-			11.1
Total operating expenses		74.8			1.1			(0.7	)		74.4
Income from operations	$	35.7		$	(4.4	)	$	(0.6	)	$	40.7

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Revenue was $279.6 million, an increase of $16.9 million, or 6.4%, compared to revenue of $262.7 million for the First Half of Fiscal 2012. The increase was primarily driven by strong backlog execution in Test, partially offset by a lower beginning backlog and reduced order volume in Sensors, as well as an estimated $4.0 million unfavorable impact of currency translation. Test revenue increased 11.2% to $235.1 million, while Sensors revenue decreased 13.1% to $44.5 million.

Gross profit was $110.5 million, a decrease of $4.6 million, or 4.0%, compared to gross profit of $115.1 million for the First Half of Fiscal 2012. Gross profit as a percentage of revenue was 39.5%, a decrease of 4.3 percentage points from 43.8% for the First Half of Fiscal 2012. This decrease reflects an unfavorable mix, resulting from a higher proportion of lower-margin custom development products in Test, as well as a 13.1% reduction in higher-margin Sensors revenue. The gross profit rate was also negatively impacted by approximately 1 percentage point from continued investment in productivity and infrastructure initiatives in Test, as well as 1 percentage point from higher warranty expense and lower engineering labor utilization in Test. These decreases were partially offset by volume leverage in Test. As previously mentioned, the productivity and infrastructure initiatives are focused on the building of a scalable enterprise and include investments in the Company’s operating system, selling process, and service delivery system. These investments will likely continue for the remainder of fiscal year 2013 and into fiscal year 2014.

Selling and marketing expense was $38.7 million, an increase of $2.5 million, or 6.9%, compared to $36.2 million for the First Half of Fiscal 2012. This increase was primarily driven by investment in sales expansion, primarily comprised of higher compensation and benefits resulting from increased headcount, as well as increased travel and other discretionary expenses to support selling efforts, partially offset by reduced bad debt expense and lower sales commissions. Selling and marketing expense as a percentage of revenue was 13.8% on higher volume, compared to 13.8% for the First Half of Fiscal 2012.

General and administrative expense was $25.5 million, a decrease of $1.6 million, or 5.9%, compared to $27.1 million for the First Half of Fiscal 2012. This decrease is primarily driven by a lower level of investment in strategic and compliance initiatives, partially offset by higher compensation and benefits driven by increased headcount. General and administrative expense as a percentage of revenue was 9.1%, compared to 10.3% for the First Half of Fiscal 2012.

Research and development expense was $10.6 million, a decrease of $0.5 million, or 4.5%, compared to $11.1 million for the First Half of Fiscal 2012, primarily due to timing of planned expenditures in Test. Research and development expense as a percentage of revenue was 3.8%, compared to 4.2% for the First Half of Fiscal 2012.

Income from operations was $35.7 million, a decrease of $5.0 million, or 12.3%, compared to income from operations of $40.7 million for the First Half of Fiscal 2012. This decrease was driven by lower gross profit. Operating income as a percentage of revenue was 12.8%, compared to 15.5% for the First Half of Fiscal 2012.

Interest expense, net was $0.2 million, a decrease of $0.2 million, or 50.0%, compared to $0.4 million of net interest expense in the First Half of Fiscal 2012, driven by a $0.3 million reduction in interest expense resulting from an overall lower level of borrowings under the Company’s credit facility.

Other expense, net was $0.5 million, an increase of $0.1 million compared to $0.4 million in the First Half of Fiscal 2012. This increase is primarily due to $0.5 million increased net losses on foreign currency transactions driven by volatility in the value of the U.S. dollar against the Japanese Yen during First Half of Fiscal 2013, partially offset by $0.4 million higher royalty income in the First Half of Fiscal 2013 associated with a Test product line that was sold by the Company in fiscal year 2012.

Provision for income taxes totaled $10.2 million for the First Half of Fiscal 2013, a decrease of $3.0 million, or 22.7%, compared to $13.2 million for the First Half of Fiscal 2012, primarily due to decreased income before income taxes and a lower effective tax rate. The effective tax rate for the First Half of Fiscal 2013 was 29.1%, a decrease of 4.0 percentage points compared to a tax rate of 33.1% for the First Half of Fiscal 2012, primarily due to the enactment of tax legislation in the Second Quarter of Fiscal 2013 that retroactively extended the United States research and development tax credit and provided a tax benefit of $1.0 million.

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Net income was $24.8 million, a decrease of $1.9 million, or 7.1%, compared to $26.7 million for the First Half of Fiscal 2012. Earnings per diluted share decreased $0.11 to $1.56, compared to $1.67 for the First Half of Fiscal 2012. The decrease was primarily driven by lower income from operations, partially offset by a decrease in the effective tax rate.

Segment Results

Test Segment

Orders and Backlog

First Half of Fiscal 2013 Compared to First Half of Fiscal 2012

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 orders for Test, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013							Six Fiscal Months Ended March 31, 2012
			Estimated
			Business Change		Currency Translation
Orders	$	230.4	$	11.8	$	(2.1	)	$	220.7

Orders totaled $230.4 million, an increase of $9.7 million, or 4.4%, compared to orders of $220.7 million for the First Half of Fiscal 2012. The First Half of Fiscal 2013 orders included two large European orders in the ground vehicles market totaling $17 million, one of which was for a rolling road wind tunnel measurement system and the other was for a transmission test system, as well as a $9 million Americas’ structures market order for a vehicle motion simulator. First Half of Fiscal 2012 orders included one large custom order of approximately $5 million. Geographically, Europe increased 15.2% and the Americas grew 4.2%, driven by the previously mentioned large orders. Asia declined 2.5%, primarily due to the cyclical nature of Chinese seismic orders, as well as timing of wind energy orders, in the structures market. Currency translation unfavorably impacted orders by approximately $2.1 million. Test accounted for 83.2% of total Company orders, compared to 81.6% for the First Half of Fiscal 2012.

Backlog of undelivered orders at the end of the quarter was $271.6 million, compared to backlog of $278.6 million at the end of the Second Quarter of Fiscal 2012.

Results of Operations

First Half of Fiscal 2013 Compared to First Half of Fiscal 2012

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 results of operations for Test, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013									Six Fiscal Months Ended March 31, 2012
				Estimated
				Business Change			Currency Translation
Revenue	$	235.1		$	26.4		$	(2.8	)	$	211.5
Cost of sales		149.1			25.9			(2.2	)		125.4
Gross profit		86.0			0.5			(0.6	)		86.1
		36.6	%								40.7	%
Operating expenses:
Selling and marketing		30.5			2.1			(0.2	)		28.6
General administrative		19.1			(1.5	)		-			20.6
Research and development		8.0			(0.5	)		-			8.5
Total operating expenses		57.6			0.1			(0.2	)		57.7
Income from operations	$	28.4		$	0.4		$	(0.4	)	$	28.4

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Revenue was $235.1 million, an increase of $23.6 million, or 11.2%, compared to revenue of $211.5 million for the First Half of Fiscal 2012. The increase was primarily driven by a strong execution on 5.2% higher beginning backlog, partially offset by an estimated $2.8 million unfavorable impact of currency translation. The backlog conversion rate benefited from the implementation of operational process improvements.

Gross profit was $86.0 million, relatively flat compared to gross profit of $86.1 million for the First Half of Fiscal 2012. Gross profit as a percentage of revenue was 36.6%, a decrease of 4.1 percentage points from 40.7% for the First Half of Fiscal 2012. Of the reduced gross profit rate, approximately 2 percentage points resulted from an unfavorable mix of lower-margin projects, 1 percentage point resulted from continued investment in productivity and infrastructure initiatives, and 1 percentage point resulted from increased warranty expense and lower engineering labor utilization caused primarily by increased innovation and training initiatives during the current year. These decreases were partially offset by leverage on higher volume. As previously mentioned, the productivity and infrastructure initiatives are focused on the building of a scalable enterprise and include investments in the Company’s operating system, selling process, and service delivery system. These investments will likely continue for the remainder of fiscal year 2013 and into fiscal year 2014.

Selling and marketing expense was $30.5 million, an increase of $1.9 million, or 6.6%, compared to $28.6 million for the First Half of Fiscal 2012. This increase was primarily driven by investment in sales expansion, primarily comprised of higher compensation and benefits resulting from increased headcount, as well as increased travel and other discretionary expenses to support selling efforts, partially offset by reduced bad debt expense and lower sales commissions. Selling and marketing expense as a percentage of revenue was 13.0% on higher volume, compared to 13.5% for the First Half of Fiscal 2012.

General and administrative expense was $19.1 million, a decrease of $1.5 million, or 7.3%, compared to $20.6 million for the First Half of Fiscal 2012. This decrease is primarily driven by a relatively lower level of investment in legal and compliance initiatives, partially offset by higher compensation and benefits driven by increased headcount. General and administrative expense as a percentage of revenue was 8.1%, compared to 9.7% for the First Half of Fiscal 2012.

Research and development expense was $8.0 million, a decrease of $0.5 million, or 5.9%, compared to the First Half of Fiscal 2012, due to timing of planned expenditures. Research and development expense as a percentage of revenue was 3.4%, compared to 4.0% for the First Half of Fiscal 2012.

Income from operations was $28.4 million, flat compared to the First Half of Fiscal 2012. Operating income as a percentage of revenue was 12.1%, compared to 13.4% for the First Quarter of Fiscal 2012.

Sensors Segment

Orders and Backlog

First Half of Fiscal 2013 Compared to First Half of Fiscal 2012

The following is a comparison of First Half of Fiscal 2013 and First Quarter of Fiscal 2012 orders for Sensors, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013								Six Fiscal Months Ended March 31, 2012
			Estimated
			Business Change			Currency Translation
Orders	$	46.6	$	(1.8	)	$	(1.4	)	$	49.8

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Orders totaled $46.6 million, a decrease of $3.2 million, or 6.4%, including an estimated 5.4% unfavorable impact of currency translation, compared to orders of $49.8 million for the First Half of Fiscal 2012, primarily due to soft market conditions in Europe and Japan. The industrial market was down 4.2% while the mobile hydraulic market was down 15.9%. Sensors accounted for 16.8% of total Company orders, compared to 18.4% for the First Half of Fiscal 2012.

Backlog of undelivered orders at the end of the quarter was $15.7 million, relatively flat compared to backlog of $15.8 million at the end of the Second Quarter of Fiscal 2012.

Results of Operations

First Half of Fiscal 2013 Compared to First Half of Fiscal 2012

The following is a comparison of First Half of Fiscal 2013 and First Half of Fiscal 2012 results of operations for Sensors, separately identifying the estimated impact of currency translation (in millions):

	Six Fiscal Months Ended March 30, 2013									Six Fiscal Months Ended March 31, 2012
				Estimated
				Business Change			Currency Translation
Revenue	$	44.5		$	(5.5	)	$	(1.2	)	$	51.2
Cost of sales		20.0			(1.7	)		(0.5	)		22.2
Gross profit		24.5			(3.8	)		(0.7	)		29.0
		55.1	%								56.7	%
Operating expenses:
Selling and marketing		8.2			0.9			(0.3	)		7.6
General administrative		6.4			0.1			(0.2	)		6.5
Research and development		2.6			-			-			2.6
Total operating expenses		17.2			1.0			(0.5	)		16.7
Income from operations	$	7.3		$	(4.8	)	$	(0.2	)	$	12.3

Revenue was $44.5 million, a decrease of $6.7 million, or 13.1%, compared to revenue of $51.2 million for the First Half of Fiscal 2012. This decrease was primarily driven by a 20.8% lower beginning backlog, reduced order volume, and an estimated $1.2 million unfavorable impact of currency translation.

Gross profit was $24.5 million, a decrease of $4.5 million, or 15.5%, compared to gross profit of $29.0 million for the First Half of Fiscal 2012, driven by lower revenue volume. Gross profit as a percentage of revenue was 55.1%, a decrease of 1.6 percentage points from 56.7% for the First Half of Fiscal 2012, driven by reduced leverage on lower volume.

Selling and marketing expense was $8.2 million, an increase of $0.6 million, or 7.9%, compared to $7.6 million for the First Half of Fiscal 2012. The increase was primarily due to higher compensation and benefits driven by increased headcount to support future sales growth. Selling and marketing expense as a percentage of revenue was 18.4%, compared to 14.8% for the First Half of Fiscal 2012.

General and administrative expense was $6.4 million, relatively flat compared to $6.5 million for the First Half of Fiscal 2012, as a relatively lower level of investment in strategic and compliance initiatives was substantially offset by higher compensation and benefits driven by senior management transition-related expenses. General and administrative expense as a percentage of revenue was 14.4% on lower volume, compared to 12.7% for the First Quarter of Fiscal 2012.

Research and development expense was $2.6 million, flat compared to the First Half of Fiscal 2012. Research and development expense as a percentage of revenue was 5.8% on lower volume, compared to 5.1% for the First Half of Fiscal 2012.

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Income from operations was $7.3 million, a decrease of $5.0 million, or 40.7%, compared to income from operations of $12.3 million for the First Half of Fiscal 2012. The decrease was primarily due to lower gross profit and higher operating expenses. Operating income as a percentage of revenue was 16.4%, compared to 24.0% for the First Half of Fiscal 2012.

Capital Resources and Liquidity

The Company had cash and cash equivalents of $46.6 million at the end of the Second Quarter of Fiscal 2013. Of this amount, $2.9 million was located in North America, $28.2 million in Europe, and $15.5 million in Asia. Of the $43.7 million of cash located outside of North America, approximately $33.0 million is not available for use in the U.S. without the incurrence of U.S. federal and state income tax consequences.

The North American balance was primarily invested in bank deposits. In Europe and Asia, the balances were primarily invested in money market funds and bank deposits. In accordance with its investment policy, the Company places cash equivalent investments with issuers who have high-quality investment credit ratings. In addition, the Company limits the amount of investment exposure it has with any particular issuer. The Company’s investment objectives are to preserve principal, maintain liquidity, and achieve the best available return consistent with its primary objectives of safety and liquidity. At the end of the Second Quarter of Fiscal 2013, the Company held no short-term investments.

Total cash and cash equivalents decreased $33.2 million in the First Half of Fiscal 2013, primarily due to increased working capital requirements, investments in property and equipment, and dividend payments, partially offset by earnings. Total cash and cash equivalents increased $19.2 million in the First Half of Fiscal 2012, primarily due to earnings and proceeds from the exercise of stock options, partially offset by dividend payments, investment in property and equipment, employee incentives and related benefit payments. The Company believes that its liquidity, represented by funds available from cash, cash equivalents, credit facility, and anticipated cash from operations, are adequate to fund ongoing operations, internal growth opportunities, capital expenditures, dividends and share purchases, as well as to fund strategic acquisitions.

Cash flows from operating activities used cash totaling $15.5 million for the First Half of Fiscal 2013, compared to cash provided of $19.6 million for the First Half of Fiscal 2012. Cash used for the First Half of Fiscal 2013 was primarily due to $29.2 million increased accounts and unbilled receivables resulting from general timing of billings and collections, $7.1 million increased inventories to support future revenue, $4.8 million decreased accounts payable resulting from general timing of purchases and payments, $2.4 million decreased advance payments received from customers driven by the timing of orders, and $3.4 million net employee incentives and related benefit payments.

Cash provided for the First Half of Fiscal 2012 was primarily due to earnings, $9.2 million increased advance payments received from customers driven by higher orders, partially offset by $8.7 million increased accounts and unbilled receivables resulting from higher revenue volume and the general timing of billing and collections, $4.5 million increased inventories to support future revenue, and $6.7 million net employee incentives and related benefit payments.

Cash flows from investing activities required the use of cash totaling $14.4 million for the First Half of Fiscal 2013, compared to the use of cash totaling $6.7 million for the First Half of Fiscal 2012, each of which reflects investment in property and equipment. The significant increase was driven by investments in various growth and productivity initiatives.

Cash flows from financing activities used cash totaling $1.0 million for the First Half of Fiscal 2013, compared to the cash provided totaling $6.7 million for the First Half of Fiscal 2012. The cash used for the First Half of Fiscal 2013 was primarily due to cash dividend payments totaling $9.6 million, partially offset by $5.0 million proceeds from short-term borrowings, and $3.4 million received in connection with stock option exercises. The cash provided for the First Half of Fiscal 2012 was primarily due to $14.0 million received in connection with stock option exercises, partially offset by payment of cash dividends of $8.0 million.

Under the terms of its borrowing agreements, the Company has agreed to certain financial covenants. At the end of the Second Quarter of Fiscal 2013, the Company was in compliance with the financial terms and conditions of those agreements.

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Off-Balance Sheet Arrangements

As of March 30, 2013, the Company had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies

The Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles, which require the Company to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. The Company believes that of its significant accounting policies, the following are particularly important to the portrayal of the Company’s results of operations and financial position, may require the application of a higher level of judgment by the Company’s management and, as a result, are subject to an inherent degree of uncertainty. Further information is provided in Note 1 in the Condensed Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Revenue Recognition. The Company is required to comply with a variety of technical accounting requirements in order to achieve consistent and accurate revenue recognition. The most significant area of judgment and estimation is percentage of completion contract accounting. The Company develops cost estimates that include materials, component parts, labor and overhead costs. Detailed costs plans are developed for all aspects of the contracts during the bidding phase of the contract. Cost estimates are largely based on actual historical performance of similar projects combined with current knowledge of the projects in progress. Significant factors that impact the cost estimates include technical risk, inflationary cost of materials and labor, changes in scope and schedule, and internal and subcontractor performance. Actual costs incurred during the project phase are monitored and compared to the estimates on a monthly basis. Cost estimates are revised based on changes in circumstances. Anticipated losses on long-term contracts are recognized when such losses become evident.

Inventories. The Company maintains a material amount of inventory to support its engineering and manufacturing operations. This inventory is stated at the lower of cost or market. On a regular basis, the Company reviews its inventory and identifies that which is excess, slow moving, and obsolete by considering factors such as inventory levels, expected product life, and forecasted sales demand. Any identified excess, slow moving, and obsolete inventory is written down to its market value through a charge to income from operations. It is possible that additional inventory write-down charges may be required in the future if there is a significant decline in demand for the Company’s products and the Company does not adjust its manufacturing production accordingly.

Impairment of Long-Lived Assets. The Company reviews the carrying value of long-lived assets or asset groups, such as property and equipment and intangibles subject to amortization, when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. When this review indicates the carrying value of an asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group, the Company recognizes an asset impairment charge against operations. The amount of the impairment charge recorded is the amount by which the carrying value of the impaired asset or asset group exceeds its fair value.

Goodwill. The Company tests goodwill at least annually for impairment. Goodwill is also tested for impairment as changes in circumstances occur indicating that the carrying value may not be recoverable. Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired.

The Company has three reporting units, two of which are assigned goodwill. At March 30, 2013, one reporting unit was assigned $14.8 million of goodwill while another was assigned $1.5 million. The fair value of a reporting unit is estimated using a discounted cash flow model that requires input of certain estimates and assumptions requiring management judgment, including projections of economic conditions and customer demand, revenue and margins, changes in competition, operating costs, and new product introductions. At the end of the prior fiscal year, the estimated fair value of the reporting unit assigned $1.5 million of goodwill was substantially in excess of its carrying value, while the estimated fair value of the reporting unit assigned $14.7 million of goodwill exceeded its carrying value by approximately 28 percent. While the Company believes the estimates and assumptions used in determining the fair value of its reporting units are reasonable, significant changes in estimates of future cash flows, such as those caused by unforeseen events or changes in market conditions, could materially impact the fair value of a reporting unit which could result in the recognition of a goodwill impairment charge.

33

Software Development Costs. The Company incurs costs associated with the development of software to be sold, leased, or otherwise marketed. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. A certain amount of judgment and estimation is required to assess when technological feasibility is established, as well as the ongoing assessment of the recoverability of capitalized costs. In evaluating the recoverability of capitalized software costs, the Company compares expected product performance, utilizing forecasted revenue amounts, to the total costs incurred to date and estimates of additional costs to be incurred. If revised forecasted product revenue is less than, and/or revised forecasted costs are greater than, the previously forecasted amounts, the net realizable value may be lower than previously estimated, which could result in the recognition of an impairment charge in the period in which such a determination is made.

Warranty Obligations. The Company is subject to warranty obligations on sales of its products. The Company records general warranty provisions based on an estimated warranty expense percentage applied to current period revenue. The percentage applied reflects historical warranty claims experience over the preceding twelve-month period. Both the experience percentage and the warranty liability are evaluated on an ongoing basis for adequacy. A certain amount of judgment is required in determining appropriate reserve levels for anticipated warranty claims. While these reserve levels are based on historical warranty experience, they may not reflect the actual claims that will occur over the upcoming warranty period, and additional warranty reserves may be required.

Income Taxes. The Company records a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of its deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results.

Other Matters

The Company’s dividend policy is to maintain a payout ratio that allows dividends to increase as earnings per share increases over time while sustaining dividends through economic cycles. The Company’s dividend practice is to target, over time, a payout ratio of approximately 30% of net earnings per share.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s investment portfolio at March 30, 2013 included $46.6 million of cash and cash equivalents. The cash equivalent portion of the Company’s investment portfolio is invested in money market funds and bank deposits. A hypothetical 1.0 percentage point increase or decrease in market interest rates would have caused interest income to increase or decrease by $0.3 million for the six-fiscal month period ended March 30, 2013.

The Company is exposed to market risk from changes in foreign currency exchange rates and interest rates. The Company manages exposure to changes in foreign currency exchange rates through its regular operating and financing activities and through the use of foreign currency exchange contracts. These contracts are used to manage the Company’s overall exposure to exchange rate fluctuations, as the gains and losses on these contracts are intended to offset gains and losses on the Company’s assets, liabilities, and cash flows.

A hypothetical 10% appreciation or depreciation in foreign currencies against the U.S. dollar, assuming all other variables were held constant, would have resulted in an estimated increase or decrease of $13.1 million in revenue for the six-fiscal month period ended March 30, 2013.

34

At March 30, 2013, the Company’s short-term borrowings outstanding consisted of $5.0 million utilization of the revolving credit facility. This utilization of the credit facility involves interest payments calculated at a fixed rate and, therefore, is not impacted by the effect of increases or decreases in market interest rates.

Item 4. Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “1934 Act”)) as of March 30, 2013. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in internal control over financial reporting during the fiscal quarter ended March 30, 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II ------ OTHER INFORMATION

Item 1. Legal Proceedings

Investigative Matters
As previously reported by the Company with disclosures starting in March 2012, the Company investigated certain gift, travel, entertainment and other expenses incurred in connection with some of the Company’s operations in the Asia Pacific region. The investigation focused on possible violations of Company policy, corresponding internal control issues and possible violations of applicable law, including the Foreign Corrupt Practices Act. Substantial investigative work has been completed and the Company has taken remedial actions, including changes to internal control procedures and removing certain persons formerly employed in its Korea office. The Company voluntarily disclosed this matter to the Department of Justice and the SEC. Additionally, the Company disclosed this matter to the U.S. Air Force pursuant to its Administrative Agreement with the U.S. Air Force. The Company presented the results of its investigation and its corrective actions to representatives of the Department of Justice and the SEC on January 16, 2013. The Company cannot predict the outcome of this matter at this time or whether it will have a material adverse impact on its business prospects, financial condition, operating results or cash flows.

Litigation
The Company is subject to various claims, legal actions, and complaints arising in the ordinary course of business. Management believes the final resolution of legal matters outstanding as of March 30, 2013 will not have a material adverse effect on the consolidated financial position or results of operations of the Company. The Company expenses legal costs as incurred.

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Item 6. Exhibits

Exhibit Number			Description
10.1	Letter Agreement (with Annexes A-D and Exhibit A) Regarding Accelerated Share Repurchase Program by and between the Company and J.P Morgan Securities, Inc., as agent for JPMorgan Chase Bank, National Association, London Branch, dated September 7, 2012 (filed herewith).
10.2	Letter Agreement, dated February 25, 2013, between the Company and William E. Bacharach (filed herewith).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) (furnished herewith).
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) (furnished herewith).
101.INS **		XBRL Instance Document (furnished herewith).
101.SCH **		XBRL Taxonomy Extension Schema Document (furnished herewith).
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document (furnished herewith).
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document (furnished herewith).
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document (furnished herewith).
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document (furnished herewith).

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements 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
Dated: May 6, 2013	/s/ SUSAN E. KNIGHT
	Susan E. Knight
	Senior Vice President and Chief Financial Officer *

* Executing as both the principal financial officer and duly authorized officer of the Company.

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EX-10.1

Exhibit 10.1

EXECUTION VERSION

September 7, 2012

MTS Systems Corporation
14000 Technology Drive
Eden Prairie, MN 55344

Ladies and Gentlemen:

          The purpose of this letter agreement (this “Confirmation”) is to confirm the terms and conditions of the Transaction entered into between J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (the “Seller”), and MTS Systems Corporation, a Minnesota corporation (the “Purchaser”), on the Trade Date specified below (the “Transaction”). This Confirmation constitutes a “Confirmation” as referred to in the Agreement specified below.

          This Confirmation evidences a complete and binding agreement between the Seller and the Purchaser as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement, form a part of, and be subject to an agreement in the form of the ISDA 2002 Master Agreement (the “Agreement”) as if the Seller and the Purchaser had executed an agreement in such form (but without any Schedule except for the election of the laws of the State of New York as the governing law but without regard to its choice of law provisions), on the Trade Date. In the event of any inconsistency between provisions of the Agreement and this Confirmation, this Confirmation will prevail for the purpose of the Transaction to which this Confirmation relates. The parties hereby agree that no Transaction other than the Transaction to which this Confirmation relates shall be governed by the Agreement.

ARTICLE 1

DEFINITIONS

          Section 1.01. Definitions. (a) As used in this Confirmation, the following terms shall have the following meanings:

          “10b-18 VWAP” means, (A) for any Trading Day described in clause (x) of the definition of Trading Day hereunder, the volume-weighted average price at which the Common Stock trades as reported in the composite transactions for United States exchanges and quotation systems, during the regular trading session for the Exchange (or, if applicable, the Successor Exchange on which the Common Stock has been listed in accordance with Section 7.01(c)) on such Trading Day, excluding (i) trades that do not settle regular way, (ii) opening (regular way) reported trades in the consolidated system on such Trading Day, (iii) trades that occur in the last ten minutes before the scheduled close of trading on the Exchange on such Trading Day and ten minutes before the scheduled close of the primary trading in the market where the trade is effected, and (iv) trades on such Trading Day that do not satisfy the requirements of Rule 10b-18(b)(3), as determined in good faith by the Calculation Agent, or (B) for any Trading Day that is described in clause (y) of the definition of Trading Day hereunder, an amount determined in good faith by the Calculation Agent as 10b-18 VWAP. The Purchaser acknowledges that the Calculation Agent may refer to the Bloomberg Page “MTSC US <Equity> AQR SEC” (or any successor thereto), in its judgment, for such Trading Day to determine the 10b-18 VWAP.

          “Additional Termination Event” has the meaning set forth in Section 7.01.

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association.
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746.
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

          “Affected Party” has the meaning set forth in Section 14 of the Agreement.

          “Affected Transaction” has the meaning set forth in Section 14 of the Agreement.

          “Affiliated Purchaser” means any “affiliated purchaser” (as such term is defined in Rule 10b-18) of the Purchaser.

          “Agreement” has the meaning set forth in the second paragraph of this Confirmation.

          “Alternative Termination Delivery Unit” means (i) in the case of a Termination Event (other than following consummation of a Merger Event or Nationalization) or Event of Default (as defined in the Agreement), one share of Common Stock and (ii) in the case of consummation of a Merger Event or Nationalization, a unit consisting of the number or amount of each type of property received by a holder of one share of Common Stock in such Merger Event or Nationalization; provided that if such Merger Event involves a choice of consideration to be received by holders of the Common Stock, an Alternative Termination Delivery Unit shall be deemed to include the amount of cash received by a holder who had elected to receive the maximum possible amount of cash as consideration for his shares.

          “Bankruptcy Code” has the meaning set forth in Section 9.07.

          “Business Day” means any day on which the Exchange is open for trading.

          “Calculation Agent” means JPMorgan Chase Bank, National Association.

          “Capped Delivery Shares” means, for any date, (i) 8,054,585 shares of Common Stock minus (ii) the number of shares of Common Stock delivered by the Seller to the Purchaser in respect of this Transaction on or prior to such date, subject to appropriate adjustments pursuant to Section 8.02.

          “Cash Distribution” has the meaning set forth in Section 7.01(f).

          “Cash Distribution Amount” means, for any “Reference Period” set forth in the Pricing Supplement, the amount specified in the Pricing Supplement for such Reference Period.

          “Cash Settlement Amount” has the meaning set forth in Section 3.01(d).

          “Cash Settlement Fee” means the amount specified as such in the Pricing Supplement.

          “Cash Settlement Purchase Period” means the period during which the Seller purchases shares of Common Stock to unwind its hedge position following the Valuation Completion Date.

          “Common Stock” has the meaning set forth in Section 2.01.

          “Communications Procedures” has the meaning set forth in Annex C hereto.

          “Confirmation” has the meaning set forth in the first paragraph of this letter agreement.

          “Contract Fee” means the amount specified as such in the Pricing Supplement.

          “Contract Period” means the period commencing on and including the Trade Date and ending on and including the date all payments or deliveries of shares of Common Stock pursuant to Section 3.01 or Section 7.03 have been made.

          “Default Notice Day” has the meaning set forth in Section 7.02.

          “De-Listing” has the meaning set forth in Section 7.01(c).

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          “Discount” means the amount specified as such in the Pricing Supplement.

          “Distribution Termination Event” has the meaning set forth in Section 7.01(f).

          “Early Termination Date” has the meaning set forth in Section 14 of the Agreement.

          “Event of Default” has the meaning set forth in Section 14 of the Agreement.

          “Exchange” means the NASDAQ Global Select Market

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Expiration Date” means the 172^nd Trading Day following the Trade Date.

          “Extraordinary Cash Dividend” means the per share cash dividend or distribution, or a portion thereof, declared by the Purchaser on shares of Common Stock that is classified by the board of directors of the Purchaser as an “extraordinary” dividend.

          “Floor Price” has the meaning specified as such in the Pricing Supplement.

          “Indemnified Person” has the meaning set forth in Section 9.02.

          “Indemnifying Party” has the meaning set forth in Section 9.02.

          “Initial Delivery Percentage” means the percentage specified as such in the Pricing Supplement.

          “Initial Number of Shares” means the number of shares of Common Stock, rounded down to the nearest integer, equal to the product of (i) the Initial Delivery Percentage and (ii) the Purchase Price divided by the Initial Share Price.

          “Initial Payment Date” means the first Business Day immediately following the Trade Date.

          “Initial Settlement Date” has the meaning set forth in Section 2.02.

          “Initial Share Price” means $52.53.

          “Maximum Delivery Shares” means, for any date, (i) 2,039,000 shares of Common Stock, minus (ii) the net number of shares of Common Stock delivered by the Purchaser to the Seller in respect of this Transaction on or prior to such date, plus (iii) the net number of shares of Common Stock delivered by the Seller to the Purchaser in respect of this Transaction on or prior to such date, subject to appropriate adjustments pursuant to Section 8.02(x).

          “Merger Event” has the meaning set forth in Section 7.01(d).

          “Nationalization” has the meaning set forth in Section 7.01(e).

          “Number of Shares” has the meaning set forth in Section 2.01.

          “Obligations” has the meaning set forth in Section 9.02.

          “Ordinary Cash Dividend” has the meaning set forth in Section 8.01(b).

          “Pricing Supplement” means the Pricing Supplement attached hereto as Annex D.

          “Private Placement Agreement” has the meaning set forth in Annex A hereto.

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          “Private Placement Price” means the private placement value of a share of Common Stock as determined in accordance with Annex A hereto.

          “Private Placement Shares” has the meaning set forth in Section 3.01(b).

          “Private Placement Procedures” has the meaning set forth in Annex A hereto.

          “Private Securities” has the meaning set forth in Annex A hereto.

          “Purchase Price” has the meaning set forth in Section 2.01.

          “Purchaser” has the meaning set forth in the first paragraph of this Confirmation.

          “Reference Period” means, for any corresponding “Cash Distribution Amount” specified in the Pricing Supplement, the period specified in the Pricing Supplement for such Cash Distribution Amount.

          “Registered Shares” has the meaning set forth in Section 3.01(b).

          “Registered Shares Fee” means the amount specified as such in the Pricing Supplement.

          “Registration Procedures” has the meaning set forth in Annex B hereto.

          “Regulation M” means Regulation M under the Exchange Act.

          “Rule 10b-18” means Rule 10b-18 promulgated under the Exchange Act (or any successor rule thereto).

          “SEC” means the Securities and Exchange Commission.

          “Securities Act” means the Securities Act of 1933, as amended.

          “Seller” has the meaning set forth in the first paragraph hereto.

          “Seller Termination Share Purchase Period” has the meaning set forth in Section 7.03.

          “Settlement Date” means (i) if Section 3.01 is applicable, the fourth Business Day following the Valuation Completion Date; (ii) if settlement in cash is applicable pursuant to Section 3.01(d), the date of such cash payment determined in accordance with Section 3.01(d)(ii); (iii) if Section 3.01(e) is applicable, the Business Day immediately following the day on which the Seller informs the Purchaser, pursuant to Annex A hereto, of the number of Private Placement Shares required to be delivered; and (iv) if Section 3.01(f) is applicable, each of the dates so advised by the Seller pursuant to Annex B hereto.

          “Settlement Number” means a number of shares of Common Stock, rounded down to the nearest integer and which number may be negative, equal to (i) the Valuation Number minus (ii) the Initial Number of Shares.

          “Settlement Purchase Amount” means an amount in cash equal to (i) the absolute value of the Settlement Number multiplied by (ii) (x) the arithmetic average of 10b-18 VWAP for each of the Trading Days in the Cash Settlement Purchase Period plus (y) $0.05.

          “Settlement Shares” has the meaning set forth in Section 3.01(b).

          “Share De-listing Event” has the meaning set forth in Section 7.01(c).

          “Successor Exchange” has the meaning set forth in Section 7.01(c).

          “Termination Amount” has the meaning set forth in Section 7.02.

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          “Termination Event” has the meaning set forth in Section 14 of the Agreement.

          “Termination Price” means the value of an Alternative Termination Delivery Unit to the Seller (determined as provided in Annex A hereto).

          “Termination Settlement Date” has the meaning set forth in Section 7.03.

          “Trade Date” has the meaning set forth in Section 2.01.

          “Trading Day” means (x) any day (i) other than a Saturday, a Sunday or a day on which the Exchange is not open for business, (ii) during which trading of any securities of the Purchaser on any national securities exchange has not been suspended, (iii) during which there has not been, in the Seller’s judgment, a material limitation in the trading of Common Stock or any options contract or futures contract related to the Common Stock, and (iv) during which there has been no suspension pursuant to Section 4.02 of this Confirmation, or (y) any day that, notwithstanding the occurrence of events contemplated in clauses (ii), (iii) and (iv) of this definition, the Seller determines to be a Trading Day.

          “Transaction” has the meaning set forth in the first paragraph of this Confirmation.

          “Valuation Completion Date” has the meaning set forth in the Pricing Supplement.

          “Valuation Number” means (i) the Purchase Price divided by (ii) the arithmetic average of the 10b-18 VWAPs for all of the Trading Days in the Valuation Period minus the Discount, as determined by the Calculation Agent in its sole judgment; provided that if the result of the calculation in clause (ii) is equal to or less than the Floor Price, then the Valuation Number shall be the Purchase Price divided by the Floor Price. For the avoidance of doubt, if the Discount is a negative number, the difference in clause (ii) of the immediately preceding sentence shall be equal to the arithmetic average of the 10b-18 VWAPs for all of the Trading Days in the Valuation Period plus the absolute value of the Discount.

          “Valuation Period” means the period of consecutive Trading Days commencing on and including the first Trading Day following the Trade Date and ending on and including the Valuation Completion Date.

ARTICLE 2
Purchase of the Stock

          Section 2.01. Purchase of the Stock. Subject to the terms and conditions of this Confirmation, the Purchaser agrees to purchase from the Seller, and the Seller agrees to sell to the Purchaser, on September 7, 2012 or on such other Business Day as the Purchaser and the Seller shall otherwise agree (the “Trade Date”), a number of shares (the “Number of Shares”) of the Purchaser’s common stock, par value $0.25 per share (“Common Stock”), for a purchase price equal to $35,000,000 (the “Purchase Price”). The Number of Shares purchased by the Purchaser hereunder shall be determined in accordance with the terms of this Confirmation.

          Section 2.02. Delivery and Payments. On the second Business Day immediately following the Trade Date (such day, the “Initial Settlement Date”), the Seller shall deliver the Initial Number of Shares to the Purchaser, following payment by the Purchaser on the Initial Payment Date of (i) an amount equal to the Purchase Price to the Seller and (ii) the Contract Fee to J.P. Morgan Securities LLC; provided that if the Seller is unable to borrow or otherwise acquire a number of shares of Common Stock equal to the Initial Number of Shares for delivery to the Purchaser on the Initial Settlement Date, the Initial Number of Shares shall be reduced to such number of shares of Common Stock as the Seller is able to borrow or otherwise acquire and any amounts payable by the Purchaser pursuant to this Article 2 shall be reduced correspondingly. Such delivery and payment shall be effected in accordance with the Seller’s customary procedures.

          Section 2.03. Conditions to Seller’s Obligations. The Seller’s obligation to deliver the Initial Number of Shares to the Purchaser on the Initial Settlement Date is subject to the condition that the representations and warranties made by the Purchaser in the Agreement shall be true and correct as of the date hereof and the Initial Settlement Date.

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ARTICLE 3
Subsequent Payments or Share Deliveries

          Section 3.01. Subsequent Payments or Share Deliveries. (a) (i) If the Settlement Number is greater than zero, the Seller shall deliver to the Purchaser a number of shares of Common Stock equal to the Settlement Number on the Settlement Date in accordance with the Seller’s customary procedures; and

               (ii)     if the Settlement Number is less than zero, the Purchaser shall make a payment of cash or delivery of shares of Common Stock to the Seller in respect of the absolute value of the Settlement Number, as provided in this Section 3.01.

          (b)     Subject to Section 3.01(c), payment of the absolute value of the Settlement Number by the Purchaser to the Seller shall be in cash or validly issued shares of Common Stock (“Settlement Shares”), and if in shares of Common Stock, then in shares to be sold in a private placement (“Private Placement Shares”) or registered shares (“Registered Shares”), as the Purchaser shall elect in its sole discretion, which binding election shall be made by written notice to the Seller no later than the close of business on the second Business Day following the Valuation Completion Date; provided that by making an election to deliver Settlement Shares pursuant to this Section 3.01(b), the Purchaser shall be deemed to make the representations and warranties in Section 5.01 as if made on the date of the Purchaser’s election; and provided further that if the Purchaser fails to make such election by such date, the Purchaser shall be deemed to have elected settlement in cash.

            (c)          (i)     Any election by the Purchaser to deliver the absolute value of the Settlement Number in Settlement Shares pursuant to clause (b) of this Section 3.01 shall not be valid, and settlement in cash shall apply, if the representations and warranties made by the Purchaser to the Seller in Section 5.01 are not true and correct in all material respects as of the date the Purchaser makes such election.

               (ii)     Notwithstanding any election by the Purchaser to make payment of the absolute value of the Settlement Number in Settlement Shares, at any time prior to the time the Seller (or any affiliate of the Seller) has contracted to resell all or any portion of such Settlement Shares, the Purchaser may elect to deliver in lieu of such Settlement Shares an amount in cash equal to the absolute value of the Settlement Number with respect to any Settlement Shares not yet contracted to be sold, in which case the provisions of Section 3.01(d) shall apply with respect to such amount; provided that any such election by the Purchaser pursuant to this clause (ii) shall not be valid and settlement in Settlement Shares shall continue to apply if the representations and warranties made by the Purchaser to the Seller in Section 5.01(a) are not true and correct in all material respects as of the date the Purchaser makes such election.

               (iii)     If the Purchaser elects to make payment of the absolute value of the Settlement Number (A) in Private Placement Shares and fails to comply with the requirements set forth in Section 3.01(e) or Annex A hereto or takes any action that would make unavailable either (1) the exemption set forth in Section 4(2) of the Securities Act for the sale of any Private Placement Shares by the Purchaser to the Seller or (2) an exemption from the registration requirements of the Securities Act reasonably acceptable to the Seller for resales of Private Placement Shares by the Seller, or (B) in Registered Shares and fails to comply with the requirements set forth in Section 3.01(f) or Annex B hereto; then in the case of either (A) or (B), the Purchaser shall deliver in lieu of any Private Placement Shares or Registered Shares an amount in cash equal to the absolute value of the Settlement Number with respect to any Settlement Shares not yet sold, in which case the provisions of Section 3.01(d) shall apply with respect to such amount.

          (d)          (i)     If the Purchaser elects to pay the absolute value of the Settlement Number in cash, if settlement in cash is otherwise applicable in accordance with this Section 3.01, or if the Purchaser elects to make payment of the absolute value of the Settlement Number in Private Placement Shares pursuant to Section 3.01(e), then the Calculation Agent shall determine an amount in cash (the “Cash Settlement Amount”) equal to (i) the Settlement Purchase Amount plus (ii) the Cash Settlement Fee.

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               (ii)     If cash settlement is applicable, payment of the Cash Settlement Amount shall be made by wire transfer of immediately available U.S. dollar funds on the first Business Day immediately following the date of notification by the Seller to the Purchaser of the Cash Settlement Amount or such later Business Day as determined by the Seller in its sole discretion.

          (e)          If the Purchaser elects to make payment of the absolute value of the Settlement Number in Private Placement Shares, then on the Settlement Date, the Purchaser shall deliver to the Seller a number of Settlement Shares equal to (A) the Cash Settlement Amount divided by (B) the Private Placement Price (determined by the Calculation Agent in accordance with the Private Placement Procedures contained in Annex A hereto).

          (f)          If the Purchaser elects to make payment of the absolute value of the Settlement Number in Registered Shares, then the Purchaser shall deliver to the Seller a number of Settlement Shares equal to (A) the absolute value of the Settlement Number plus (B) an additional number of Settlement Shares to take into account the Registered Shares Fee on the absolute value of the Settlement Number. Such Settlement Shares shall be delivered in such numbers and on such dates on or following the Valuation Completion Date as are specified by the Seller in accordance with the Registration Procedures contained in Annex B hereto.

          Section 3.02. Private Placement Procedures and Registration Procedures. If the Purchaser elects to deliver Private Placement Shares pursuant to Section 3.01(b) or elects to deliver Alternative Termination Delivery Units pursuant to Section 7.02, the Private Placement Procedures contained in Annex A hereto shall apply, and if the Purchaser elects to deliver Registered Shares pursuant to Section 3.01(b), the Registration Procedures contained in Annex B hereto shall apply.

          Section 3.03. Continuing Obligation to Deliver Shares. (a) If at any time, as a result of provisions limiting deliveries of shares of Common Stock to the number of Maximum Delivery Shares, the Purchaser fails to deliver to the Seller any shares of Common Stock, the Purchaser shall, to the extent that the Purchaser has at such time authorized but unissued shares of Common Stock not reserved for other purposes, promptly notify the Seller thereof and deliver to the Seller a number of shares of Common Stock not previously delivered as a result of such provisions.

          (b)       The Purchaser agrees to use its best efforts to cause the number of authorized but unissued shares of Common Stock to be increased, if necessary, to an amount sufficient to permit the Purchaser to fulfill its obligations under this Section 3.03.

ARTICLE 4
Market Transactions

          Section 4.01. Transactions by the Seller. (a) The parties agree and acknowledge that:

               (i)     During any Cash Settlement Purchase Period and any Seller Termination Share Purchase Period, the Seller (or its agent or affiliate) may purchase shares of Common Stock in connection with this Confirmation. The timing of such purchases by the Seller, the price paid per share of Common Stock pursuant to such purchases and the manner in which such purchases are made, including without limitation whether such purchases are made on any securities exchange or privately, shall be within the sole judgment of the Seller; provided that the Seller shall use good faith efforts to make all purchases of Common Stock in a manner that would comply with the limitations set forth in clauses (b)(2), (b)(3), (b)(4) and (c) of Rule 10b-18 (but without regard to clause (a)(13)(iv) of Rule 10b-18) as if such rule were applicable to such purchases.

               (ii)     During the Valuation Period, the Seller (or its agent or affiliate) may effect transactions in shares of Common Stock in connection with this Confirmation. The timing of such transactions by the Seller, the price paid or received per share of Common Stock pursuant to such transactions and the manner in which such transactions are made, including without limitation whether such transactions are made on any securities exchange or privately, shall be within the sole judgment of the Seller.

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               (iii)     The Purchaser shall, at least one day prior to the first day of the Valuation Period, any Cash Settlement Purchase Period and any Seller Termination Share Purchase Period, notify the Seller of the total number of shares of Common Stock purchased in Rule 10b-18 purchases of blocks pursuant to the once-a-week block exception set forth in Rule 10b-18(b)(4) by or for the Purchaser or any of its Affiliated Purchasers during each of the four calendar weeks preceding such day and during the calendar week in which such day occurs (“Rule 10b-18 purchase” and “blocks” each being used as defined in Rule 10b-18), which notice shall be substantially in the form set forth as Exhibit A hereto.

          (b)       The Purchaser acknowledges and agrees that (i) all transactions effected pursuant to Section 4.01 hereunder shall be made in the Seller’s sole judgment and for the Seller’s own account and (ii) the Purchaser does not have, and shall not attempt to exercise, any influence over how, when or whether to effect such transactions, including, without limitation, the price paid or received per share of Common Stock pursuant to such transactions whether such transactions are made on any securities exchange or privately. It is the intent of the Seller and the Purchaser that this Transaction comply with the requirements of Rule 10b5-1(c) of the Exchange Act and that this Confirmation shall be interpreted to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) and the Seller shall take no action that results in the Transaction not so complying with such requirements.

          (c)       Notwithstanding anything to the contrary in this Confirmation, the Purchaser acknowledges and agrees that, on any day, the Seller shall not be obligated to deliver or receive any shares of Common Stock to or from the Purchaser and the Purchaser shall not be entitled to receive any shares of Common Stock from the Seller on such day, to the extent (but only to the extent) that after such transactions the Seller’s ultimate parent entity would directly or indirectly beneficially own (as such term is defined for purposes of Section 13(d) of the Exchange Act) at any time on such day in excess of 8.0% of the outstanding shares of Common Stock. Any purported receipt or delivery of shares of Common Stock shall be void and have no effect to the extent (but only to the extent) that after any receipt or delivery of such shares of Common Stock the Seller’s ultimate parent entity would directly or indirectly so beneficially own in excess of 8.0% of the outstanding shares of Common Stock. If, on any day, any delivery or receipt of shares of Common Stock by the Seller is not effected, in whole or in part, as a result of this provision, the Seller’s and Purchaser’s respective obligations to make or accept such receipt or delivery shall not be extinguished and such receipt or delivery shall be effected over time as promptly as the Seller determines, in the reasonable determination of the Seller, that after such receipt or delivery its ultimate parent entity would not directly or indirectly beneficially own in excess of 8.0% of the outstanding shares of Common Stock.

          Section 4.02. Adjustment of Transaction for Securities Laws. (a) Notwithstanding anything to the contrary in Section 4.01(a), if, based on the advice of counsel, the Seller reasonably determines that on any Trading Day, the Seller’s trading activity in order to manage its economic hedge in respect of the Transaction would not be advisable in respect of applicable securities laws, then the Seller may extend the Expiration Date, modify the Valuation Period or otherwise adjust the terms of the Transaction in its good faith reasonable discretion to ensure Seller’s compliance with such laws and to preserve the fair value of the Transaction to the Seller. The Seller shall notify the Purchaser of the exercise of the Seller’s rights pursuant to this Section 4.02(a) upon such exercise.

          (b)       The Purchaser agrees that, during the Contract Period, neither the Purchaser nor any of its affiliates or agents shall make any distribution (as defined in Regulation M) of Common Stock, or any security for which the Common Stock is a reference security (as defined in Regulation M) or take any other action that would, in the view of the Seller, preclude purchases by the Seller of the Common Stock or cause the Seller to violate any law, rule or regulation with respect to such purchases.

          Section 4.03. Purchases of Common Stock by the Purchaser. Without the prior written consent of the Seller, the Purchaser shall not, and shall cause its affiliates and affiliated purchasers (each as defined in Rule 10b-18) not to, directly or indirectly (including, without limitation, by means of a derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any shares of Common Stock (or equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable for shares of Common Stock during the Contract Period; provided, however, that the foregoing shall not prohibit (i) the Purchaser’s ability (or the ability of any “agent independent of the issuer” (as defined in Rule 10b-18)), pursuant to any plan (as defined in Rule 10b-18) of the Purchaser, to re-acquire shares of Common Stock in connection with any equity transaction related to such plan or to limit the Purchaser’s ability to withhold shares of Common Stock to cover tax liabilities associated with such equity transactions, so long as any re-acquisition, withholding or repurchase does not constitute a “Rule 10b-18 purchase” (as defined in Rule 10b-18) or (ii) delivery of shares of Common Stock of or to the Purchaser’s affiliates or affiliated purchasers pursuant to the terms of convertible securities, warrants, options or other similar securities outstanding as of the Trade Date.

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ARTICLE 5
Representations, Warranties and Agreements

          Section 5.01. Repeated Representations, Warranties and Agreements of the Purchaser. The Purchaser represents and warrants to, and agrees with, the Seller, on the date hereof and on any date pursuant to which the Purchaser makes an election to deliver Settlement Shares pursuant to Section 3.01, to pay cash in lieu of Settlement Shares pursuant to Section 3.01(c)(ii) or to receive or deliver Alternative Termination Delivery Units pursuant to Section 7.03, that:

          (a)     Disclosure; Compliance with Laws. The reports and other documents filed by the Purchaser with the SEC pursuant to the Exchange Act when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading. The Purchaser is not in possession of any material nonpublic information regarding the Purchaser or the Common Stock.

          (b)     Rule 10b5-1. The Purchaser acknowledges that (i) the Purchaser does not have, and shall not attempt to exercise, any influence over how, when or whether to effect purchases of Common Stock by the Seller (or its agent or affiliate) in connection with this Confirmation and (ii) the Purchaser is entering into the Agreement and this Confirmation in good faith and not as part of a plan or scheme to evade compliance with federal securities laws including, without limitation, Rule 10b-5 promulgated under the Exchange Act. The Purchaser also acknowledges and agrees that any amendment, modification, waiver or termination of this Confirmation must be effected in accordance with the requirements for the amendment or termination of a “plan” as defined in Rule 10b5-1(c) under the Exchange Act. Without limiting the generality of the foregoing, any such amendment, modification, waiver or termination shall be made in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5 under the Exchange Act, and no amendment, modification or waiver shall be made at any time at which the Purchaser or any officer or director of the Purchaser is aware of any material nonpublic information regarding the Purchaser or the Common Stock.

          (c)     Nature of Shares Delivered. Any shares of Common Stock or Alternative Termination Delivery Units delivered to the Seller pursuant to this Confirmation, when delivered, shall have been duly authorized and shall be duly and validly issued, fully paid and nonassessable and free of preemptive or similar rights, and such delivery shall pass title thereto free and clear of any liens or encumbrances.

          (d)     No Manipulation. The Purchaser is not entering into this Confirmation to create actual or apparent trading activity in the Common Stock (or any security convertible into or exchangeable for Common Stock) or to manipulate the price of the Common Stock (or any security convertible into or exchangeable for Common Stock).

          (e)     Regulation M. The Purchaser is not engaged in a distribution, as such term is used in Regulation M, that would preclude purchases by the Purchaser or the Seller of the Common Stock or cause the Seller to violate any law, rule or regulation with respect to such purchases.

          (f)     Board Authorization. The Purchaser is entering into this Transaction in connection with its share repurchase program, which was approved by its board of directors and publicly disclosed, solely for the purposes stated in such board resolution and public disclosure. There is no internal policy of the Purchaser, whether written or oral, that would prohibit the Purchaser from entering into any aspect of this Transaction, including, but not limited to, the purchases of shares of Common Stock to be made pursuant hereto.

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          (g)     Due Authorization and Good Standing. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. This Confirmation has been duly authorized, executed and delivered by the Purchaser and (assuming due authorization, execution and delivery thereof by the Seller) constitutes a valid and legally binding obligation of the Purchaser. The Purchaser has all corporate power to enter into this Confirmation and to consummate the transactions contemplated hereby and to purchase the Common Stock and deliver any Settlement Shares in accordance with the terms hereof.

          (h)     Certain Transactions. There has not been any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to the Purchaser that would fall within the scope of Rule 10b-18(a)(13)(iv), where such announcement was within the Purchaser’s control.

          Section 5.02. Initial Representations, Warranties and Agreements of the Purchaser. The Purchaser represents and warrants to, and agrees with the Seller, as of the date hereof, that:

          (a)     Solvency. The assets of the Purchaser at their fair valuation exceed the liabilities of the Purchaser, including contingent liabilities; the capital of the Purchaser is adequate to conduct the business of the Purchaser and the Purchaser has the ability to pay its debts and obligations as such debts mature and does not intend to, or does not believe that it will, incur debt beyond its ability to pay as such debts mature.

          (b)     Required Filings. The Purchaser has made, and will use its best efforts to make, all filings required to be made by it with the SEC, any securities exchange or any other regulatory body with respect to the Transaction contemplated hereby.

          (c)     No Conflict. The execution and delivery by the Purchaser of, and the performance by the Purchaser of its obligations under, this Confirmation and the consummation of the transactions herein contemplated do not conflict with or violate (i) any provision of the articles of incorporation, by-laws or other constitutive documents of the Purchaser, (ii) any statute or order, rule, regulation or judgment of any court or governmental agency or body having jurisdiction over the Purchaser or any of its subsidiaries or any of their respective assets or (iii) any contractual restriction binding on or affecting the Purchaser or any of its subsidiaries or any of its assets.

          (d)     Consents. All governmental and other consents that are required to have been obtained by the Purchaser with respect to performance, execution and delivery of this Confirmation have been obtained and are in full force and effect and all conditions of any such consents have been complied with.

          (e)     Investment Company Act. The Purchaser is not and, after giving effect to the transactions contemplated in this Confirmation, will not be required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

          (f)     Commodity Exchange Act. The Purchaser is an “eligible contract participant”, as such term is defined in Section 1a(12) of the Commodity Exchange Act, as amended.

          (g)     Suitability. The Purchaser (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least $50 million as of the date hereof.

          Section 5.03. Additional Representations, Warranties and Agreements. The Purchaser and the Seller represent and warrant to, and agree with, each other that:

          (a)     Agency. Each party agrees and acknowledges that (i) J.P. Morgan Securities LLC, an affiliate of the Seller (“JPMS”), has acted solely as agent and not as principal with respect to this Transaction and (ii) JPMS has no obligation or liability, by way of guaranty, endorsement or otherwise, in any manner in respect of this Transaction (including, if applicable, in respect of the settlement thereof). Each party agrees it will look solely to the other party (or any guarantor in respect thereof) for performance of such other party’s obligations under this Transaction. JPMS is authorized to act as agent for the Seller.

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          (b)     Non-Reliance. Each party has entered into this Transaction solely in reliance on its own judgment. Neither party has any fiduciary obligation to the other party relating to this Transaction. In addition, neither party has held itself out as advising, or has held out any of its employees or agents as having the authority to advise, the other party as to whether or not the other party should enter into this Transaction, any subsequent actions relating to this Transaction or any other matters relating to this Transaction. Neither party shall have any responsibility or liability whatsoever in respect of any advice of this nature given, or views expressed, by it or any such persons to the other party relating to this Transaction, whether or not such advice is given or such views are expressed at the request of the other party. The Purchaser has conducted its own analysis of the legal, accounting, tax and other implications of this Transaction and consulted such advisors, accountants and counsel as it has deemed necessary.

          Section 5.04. Representations and Warranties of the Seller. The Seller represents and warrants to the Purchaser that:

          (a)     Due Authorization. This Confirmation has been duly authorized, executed and delivered by the Seller and (assuming due authorization, execution and delivery thereof by the Purchaser) constitutes a valid and legally binding obligation of the Seller. The Seller has all corporate power to enter into this Confirmation and to consummate the transactions contemplated hereby and to deliver the Common Stock in accordance with the terms hereof.

          (b)     Right to Transfer. The Seller will, at the Initial Settlement Date and on any other day on which it is required to deliver shares of Common Stock to the Purchaser hereunder, have the free and unqualified right to transfer the Number of Shares of Common Stock to be delivered by the Seller pursuant to Sections 2.01 and 3.01 hereof, free and clear of any security interest, mortgage, pledge, lien, charge, claim, equity or encumbrance of any kind.

          (c)     Commodity Exchange Act. The Seller is an “eligible contract participant”, as such term is defined in Section 1a(12) of the Commodity Exchange Act, as amended.

ARTICLE 6
Additional Covenants

          Section 6.01. Purchaser’s Further Assurances. The Purchaser hereby agrees with the Seller that the Purchaser shall cooperate with the Seller, and execute and deliver, or use its best efforts to cause to be executed and delivered, all such other instruments, and to obtain all consents, approvals or authorizations of any person, and take all such other actions as the Seller may reasonably request from time to time, consistent with the terms of this Confirmation, in order to effectuate the purposes of this Confirmation and the Transaction contemplated hereby.

          Section 6.02. Purchaser’s Hedging Transactions. The Purchaser hereby agrees with the Seller that the Purchaser shall not, during the Contract Period, enter into or alter any corresponding or hedging transaction or position with respect to the Common Stock (including, without limitation, with respect to any securities convertible or exchangeable into the Common Stock) and agrees not to alter or deviate from the terms of this Confirmation.

          Section 6.03. No Communications. The Purchaser hereby agrees with the Seller that the Purchaser shall not, directly or indirectly, communicate any information relating to the Common Stock or this Transaction (including any notices required by Section 6.05) to any employee of the Seller or J.P. Morgan Securities LLC, other than as set forth in the Communications Procedures attached as Annex C hereto.

          Section 6.04. Maximum Deliverable Number of Shares of Common Stock. (a)Notwithstanding any other provision of this Confirmation, the Purchaser shall not be required to deliver Settlement Shares, or shares of Common Stock or other securities comprising the aggregate Alternative Termination Delivery Units, in excess of the number of Maximum Delivery Shares, in each case except to the extent that the Purchaser has available at such time authorized but unissued shares of such Common Stock or other securities not expressly reserved for any other uses (including, without limitation, shares of Common Stock reserved for issuance upon the exercise of options or convertible debt). The Purchaser shall not permit the sum of (i) the number of Maximum Delivery Shares plus (ii) the aggregate number of shares expressly reserved for any such other uses, in each case whether expressed as caps or as numbers of shares reserved or otherwise, to exceed at any time the number of authorized but unissued shares of Common Stock.

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          (b)     Notwithstanding any other provision of this Confirmation, the Seller shall not be required to deliver Settlement Shares, or shares of Common Stock or other securities comprising the aggregate Alternative Termination Delivery Units, in excess of the number of Capped Delivery Shares.

          Section 6.05. Notice of Certain Transactions. If at any time during the Contract Period, the Purchaser makes, or expects to be made, or has made, any public announcement (as defined in Rule 165(f) under the Securities Act) of any merger, acquisition, or similar transaction involving a recapitalization relating to the Purchaser (other than any such transaction in which the consideration consists solely of cash and there is no valuation period, or as to which the completion of such transaction or the completion of the vote by target shareholders has occurred), then the Purchaser shall (i) notify the Seller prior to the opening of trading in the Common Stock on any day on which the Purchaser makes, or expects to be made, or has made any such public announcement, (ii) notify the Seller promptly following any such announcement (or, if later, prior to the opening of trading in the Common Stock on the first day of any Seller Termination Share Payment Period) that such announcement has been made and (iii) promptly deliver to the Seller following the making of any such announcement (or, if later, prior to the opening of trading in the Common Stock on the first day of any Seller Termination Share Payment Period) a certificate indicating (A) the Purchaser’s average daily Rule 10b-18 purchases (as defined in Rule 10b-18) during the three full calendar months preceding the date of such announcement and (B) the Purchaser’s block purchases (as defined in Rule 10b-18) effected pursuant to paragraph (b)(4) of Rule 10b-18 during the three full calendar months preceding the date of such announcement. In addition, the Purchaser shall promptly notify the Seller of the earlier to occur of the completion of such transaction and the completion of the vote by target shareholders. Accordingly, the Purchaser acknowledges that its actions in relation to any such announcement or transaction must comply with the standards set forth in Section 6.03.

ARTICLE 7
Termination

          Section 7.01. Additional Termination Events. (a) An Additional Termination Event shall occur in respect of which the Purchaser is the sole Affected Party and this Transaction is the sole Affected Transaction if, on any day, the Seller determines, in its sole reasonable judgment, that it is unable to establish, re-establish or maintain any hedging transactions reasonably necessary in the normal course of such party’s business of hedging the price and market risk of entering into and performing under this Transaction, due to market illiquidity, illegality or lack of availability of hedging transaction market participants.

          (b)     An Additional Termination Event shall occur in respect of which the Purchaser is the sole Affected Party and this Transaction is the sole Affected Transaction if (i) a Share De-listing Event occurs; (ii) a Merger Event occurs; (iii) a Nationalization occurs, (iv) a Distribution Termination Event occurs or (v) an event described in paragraph III of Annex C occurs.

          (c)     A “Share De-listing Event” means that at any time during the Contract Period, the Common Stock ceases to be listed, traded or publicly quoted on the Exchange for any reason (other than a Merger Event, a “De-Listing”) and is not immediately re-listed, traded or quoted as of the date of such de-listing, on another U.S. national securities exchange or a U.S. automated interdealer quotation system (a “Successor Exchange”); provided that it shall not constitute an Additional Termination Event if the Common Stock is immediately re-listed on a Successor Exchange upon its De-Listing from the Exchange, and the Successor Exchange shall be deemed to be the Exchange for all purposes. In addition, in such event, the Seller shall make any commercially reasonable adjustments to the terms of the Transaction that the Seller determines appropriate in its reasonable good faith judgment to preserve the fair value of the Transaction to the Seller.

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          (d)     A “Merger Event” means the public announcement, including any public announcement as defined in Rule 165(f) of the Securities Act (by the Purchaser or otherwise) at any time during the Contract Period of any (i) planned recapitalization, reclassification or change of the Common Stock that will, if consummated, result in a transfer of more than 20% of the outstanding shares of Common Stock, (ii) planned consolidation, amalgamation, merger or similar transaction of the Purchaser with or into another entity (other than a consolidation, amalgamation or merger in which the Purchaser will be the continuing entity and which does not result in any such recapitalization, reclassification or change of more than 20% of such shares outstanding), (iii) other takeover offer for the shares of Common Stock that is aimed at resulting in a transfer of more than 20% of such shares of Common Stock (other than such shares owned or controlled by the offeror), (iv) intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, any of the foregoing or (v) irrevocable commitment to any of the foregoing.

          (e)     A “Nationalization” means that all or substantially all of the outstanding shares of Common Stock or assets of the Purchaser are nationalized, expropriated or are otherwise required to be transferred to any governmental agency, authority or entity.

          (f)     A “Distribution Termination Event” means a declaration by the Purchaser of any cash dividend or distribution on shares of Common Stock, other than an Extraordinary Cash Dividend (a “Cash Distribution”), that has a record date during the Contract Period, the amount of which, together with all prior declared Cash Distributions that have a record date during the same Reference Period of the Purchaser, exceeds the Cash Distribution Amount specified in the Pricing Supplement for such Reference Period, and in respect of which the Calculation Agent has not made an adjustment pursuant to Section 8.01(b).

          Section 7.02. Consequences of Additional Termination Events. (a) In the event of the occurrence or effective designation of an Early Termination Date under the Agreement, cash settlement, as set forth in Section 7.02(b), shall apply unless (i) the Purchaser elects (which election shall be binding), in lieu of payment or receipt, as applicable, of the amount payable in respect of this Transaction pursuant to Section 6(d)(ii) of the Agreement (the “Termination Amount”), to deliver or to receive Alternative Termination Delivery Units pursuant to Section 7.03, and (ii) notifies the Seller of such election by delivery of written notice to the Seller on the Business Day immediately following the Purchaser’s receipt of a notice (as required by Section 6(d) of the Agreement following the designation of an Early Termination Date in respect of this Transaction) setting forth the amounts payable by the Purchaser or by the Seller with respect to such Early Termination Date (the date of such delivery, the “Default Notice Day”); provided that the Purchaser shall not have the right to elect the delivery or receipt of the Alternative Termination Delivery Units pursuant to Section 7.03 if:

               (i)     the representations and warranties made by the Purchaser to the Seller in Section 5.01 are not true and correct as of the date the Purchaser makes such election, as if made on such date, or

               (ii)     in the event that the Termination Amount is payable by the Purchaser to the Seller, (A) the Purchaser has taken any action that would make unavailable (x) the exemption set forth in Section 4(2) of the Securities Act, for the sale of any Alternative Termination Delivery Units by the Purchaser to the Seller or (y) an exemption from the registration requirements of the Securities Act reasonably acceptable to the Seller for resales of Alternative Termination Delivery Units by the Seller, and (B) such Early Termination Date is in respect of an Event of Default which is within Purchaser’s control (including, without limitation, failure to execute a Private Placement Agreement or otherwise comply with the requirements applicable to Purchaser set forth in Annex A hereto).

           For the avoidance of doubt, upon the Purchaser’s making an election to deliver Alternative Termination Delivery Units pursuant to this Section 7.02, the Purchaser shall be deemed to make the representations and warranties in Section 5.01 hereof as if made on the date of the Purchaser’s election. Notwithstanding the foregoing, at any time prior to the time the Seller (or any affiliate of the Seller) has contracted to resell the property to be delivered upon alternative termination settlement, the Purchaser may deliver in lieu of such property an amount in cash equal to the Termination Amount in the manner set forth in Section 6(d) of the Agreement.

          (b)     If cash settlement applies in respect of an Early Termination Date, Section 6 of the Agreement shall apply.

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          Section 7.03. Alternative Termination Settlement. (a) Subject to Section 7.02, if the Termination Amount shall be payable by the Purchaser to the Seller and the Purchaser elects to deliver the Alternative Termination Delivery Units to the Seller, the Purchaser shall, as soon as directed by the Seller after the Default Notice Day (such date, the “Termination Settlement Date”), deliver to the Seller a number of Alternative Termination Delivery Units equal to the quotient of (A) the Termination Amount divided by (B) the Termination Price.

          (b)     Subject to Section 7.02, if the Termination Amount shall be payable by the Seller to the Purchaser and the Purchaser elects to receive the Alternative Termination Delivery Units from the Seller, (i) the Seller shall, beginning on the first Trading Day following the Default Notice Day and ending when the Seller shall have satisfied its obligations under this clause (the “Seller Termination Share Purchase Period”), purchase (subject to the provisions of Section 4.01 and Section 4.02 hereof) a number of Alternative Termination Delivery Units equal to the quotient of (A) the Termination Amount divided by (B) the Termination Price; and (ii) the Seller shall deliver such Alternative Termination Delivery Units to the Purchaser on the settlement dates relating to such purchases.

          Section 7.04. Notice of Default. If an Event of Default occurs in respect of the Purchaser, the Purchaser will, promptly upon becoming aware of it, notify the Seller specifying the nature of such Event of Default.

ARTICLE 8
Adjustments

          Section 8.01. Cash Dividends. (a) If the Purchaser declares any Extraordinary Cash Dividend that has a record date during the Contract Period, then prior to or on the date on which such Extraordinary Cash Dividend is paid by the Purchaser to holders of record, the Purchaser shall pay to the Seller an amount in cash equal to the product of (i) the amount of such Extraordinary Cash Dividend and (ii) the theoretical short delta number of shares as of the opening of business on the related ex-dividend date, as determined by the Calculation Agent, required for the Seller to hedge its exposure to the Transaction.

          (b)     If the Purchaser declares any cash dividend on shares of Common Stock that is not an Extraordinary Cash Dividend (an “Ordinary Cash Dividend”) and that has a record date during the Contract Period, and the amount of such Ordinary Cash Dividend, together with all prior declared Ordinary Cash Dividends that have a record date during the same Reference Period, exceeds the Cash Distribution Amount specified in the Pricing Supplement for such Reference Period, the Calculation Agent may make corresponding adjustments with respect to the Floor Price as the Calculation Agent determines appropriate to preserve the fair value of the Transaction to the Seller, and shall determine the effective date of such adjustment.

          Section 8.02. Other Dilution Adjustments. If (x) any corporate event occurs having a dilutive or concentrative effect on the theoretical value of the Common Stock (other than any cash dividend but including, without limitation, a spin-off, a stock split, stock or other dividend or distribution, reorganization, rights offering or recapitalization), or (y) as a result of the definition of Trading Day (whether because of a suspension of transactions pursuant to Section 4.02 or otherwise), any day that would otherwise be a Trading Day during the Contract Period is not a Trading Day or on such Trading Day, pursuant to Section 4.02, the Seller effects transactions with respect to shares of Common Stock at a volume lower than originally anticipated with respect to this Transaction, or (z) as a result of market conditions, the Seller incurs additional costs in connection with maintaining its hedge position with respect to this Transaction resulting from the insufficient availability of stock lenders willing and able to lend shares of Common Stock with a borrow cost not significantly greater than the cost as of the date hereof and otherwise on terms consistent with those as of the date hereof, then in any such case, the Calculation Agent shall make corresponding adjustments with respect to any variable relevant to the terms of the Transaction, as the Calculation Agent determines appropriate in its reasonable good faith judgment to preserve the fair value of the Transaction to the Seller, and shall determine the effective date of such adjustment.

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ARTICLE 9
Miscellaneous

          Section 9.01. Successors and Assigns. All covenants and agreements in this Confirmation made by or on behalf of either of the parties hereto shall bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not.

          Section 9.02. Purchaser Indemnification. The Purchaser (the “Indemnifying Party”) agrees to indemnify and hold harmless the Seller and its officers, directors, employees, affiliates, advisors, agents and controlling persons (each, an “Indemnified Person”) from and against any and all losses, claims, damages and liabilities, joint or several (collectively, “Obligations”), resulting from a breach by Purchaser of this Confirmation or any claim, litigation, investigation or proceeding relating thereto, and to reimburse, within 30 days, upon written request, each such Indemnified Person for any reasonable legal or other expenses incurred in connection with investigating, preparation for, providing evidence for or defending any of the foregoing, provided, however, that the Indemnifying Party shall not have any liability to any Indemnified Person to the extent that such Obligations (i) are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Person (and in such case, such Indemnified Person shall promptly return to the Indemnifying Party any amounts previously expended by the Indemnifying Party hereunder) or (ii) are trading losses incurred by the Seller as part of its purchases or sales of shares of Common Stock pursuant to this Confirmation (unless the Purchaser has breached any agreement, term or covenant herein).

          Section 9.03. Assignment and Transfer. Notwithstanding the Agreement, the Seller may assign any of its rights or duties hereunder to any one or more of its affiliates without the prior written consent of the Purchaser. Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Seller to purchase, sell, receive or deliver any shares of Common Stock or other securities to or from the Purchaser, Seller may designate any of its affiliates to purchase, sell, receive or deliver such shares of Common Stock or other securities and otherwise to perform the Seller’s obligations in respect of this Transaction and any such designee may assume such obligations. The Seller may assign the right to receive Settlement Shares to any third party who may legally receive Settlement Shares. The Seller shall be discharged of its obligations to the Purchaser only to the extent of any such performance. For the avoidance of doubt, Seller hereby acknowledges that notwithstanding any such designation hereunder, to the extent any of Seller’s obligations in respect of this Transaction are not completed by its designee, Seller shall be obligated to continue to perform or to cause any other of its designees to perform in respect of such obligations.

          Section 9.04. Calculation Agent. Whenever the Calculation Agent is required to act or to exercise judgment in any way with respect to this Transaction, it will do so in good faith and in a commercially reasonable manner.

          Section 9.05. Non-confidentiality. The Seller and the Purchaser hereby acknowledge and agree that, subject to Section 6.03, each is authorized to disclose every aspect of this Confirmation and the transactions contemplated hereby to any and all persons, without limitation of any kind, and there are no express or implied agreements, arrangements or understandings to the contrary.

          Section 9.06. Unenforceability and Invalidity. To the extent permitted by law, the unenforceability or invalidity of any provision or provisions of this Confirmation shall not render any other provision or provisions herein contained unenforceable or invalid.

          Section 9.07. Securities Contract. The parties hereto agree and acknowledge as of the date hereof that (i) the Seller is a “financial institution” within the meaning of Section 101(22) of Title 11 of the United States Code (the “Bankruptcy Code”) and (ii) this Confirmation is a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, entitled to the protection of Sections 362(b)(6) and 555 of the Bankruptcy Code.

          Section 9.08. No Collateral, Netting or Setoff. Notwithstanding any provision of the Agreement, or any other agreement between the parties, to the contrary, the obligations of the Purchaser hereunder are not secured by any collateral. Obligations under this Transaction shall not be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against any other obligations of the parties, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and no other obligations of the parties shall be netted, recouped or set off (including pursuant to Section 6 of the Agreement) against obligations under this Transaction, whether arising under the Agreement, this Confirmation, under any other agreement between the parties hereto, by operation of law or otherwise, and each party hereby waives any such right of setoff, netting or recoupment.

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          Section 9.09. Equity Rights. The Seller acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of holders of Common Stock in the event of the Purchaser’s bankruptcy.

          Section 9.10. Notices. Unless otherwise specified herein, any notice, the delivery of which is expressly provided for in this Confirmation, may be made by telephone, to be confirmed in writing to the address below. Changes to the information below must be made in writing.

(a)	If to the Purchaser:
	MTS Systems Corporation
	14000 Technology Drive
	Eden Prairie, MN 55344
	Attention: Tim Radermacher
	Title: Treasurer and Director of Tax
	Telephone No: (952) 937-4004
	Facsimile No: (952) 937-4515
(b)	If to the Seller:
	JPMorgan Chase Bank, National Association
	c/o J.P. Morgan Securities LLC
	EDG Marketing Support
	Email: EDG_OTC_HEDGING_MS@jpmorgan.com
	Fax: 1-866-886-4506
	With a copy to:
	Sudheer Tegulapalle
	Executive Director
	383 Madison Avenue, Floor 05
	New York, NY, 10179, United States
	Telephone No: (212) 622-2100
	Facsimile No: (212) 622-0398
	Email: sudheer.r.tegulapalle@jpmorgan.com

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          Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed for that purpose and returning it to us.

Yours sincerely,

J.P. MORGAN SECURITIES LLC, as agent for JPMorgan Chase Bank, National Association, London Branch
By:
	Name:
	Title:

Confirmed as of the date first
above written:
MTS SYSTEMS CORPORATION
By:
	Name:
	Title:

JPMorgan Chase Bank, National Association
Organised under the laws of the United States as a National Banking Association.
Main Office 1111 Polaris Parkway, Columbus, Ohio 43271
Registered as a branch in England & Wales branch No. BR000746.
Registered Branch Office 125 London Wall, London EC2Y 5AJ
Authorised and regulated by the Financial Services Authority

ANNEX A

PRIVATE PLACEMENT PROCEDURES

I. Introduction

          MTS Systems Corporation, a Minnesota corporation (the “Purchaser”) and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (the “Seller”) have agreed to these procedures (the “Private Placement Procedures”) in connection with entering into the Confirmation (the “Confirmation”) dated as of September 7, 2012 between JPMorgan and the Purchaser relating to the sale by JPMorgan to the Purchaser of common stock, par value $0.25 per share, or security entitlements in respect thereof (the “Common Stock”) of the Purchaser. These Private Placement Procedures supplement, form part of, and are subject to the Confirmation and all terms used and not otherwise defined herein shall have the meanings assigned to them in the Confirmation.

II. Procedures

          If the Purchaser elects to deliver Private Placement Shares pursuant to Section 3.01(b) of the Confirmation or elects to deliver Alternative Termination Delivery Units pursuant to Section 7.02 of the Confirmation, the Purchaser shall effect such delivery in compliance with the private placement procedures provided herein.

          (a)          The Purchaser shall afford the Seller, and any potential buyers of the Private Placement Shares (or, in the case of alternative termination settlement, Alternative Termination Delivery Units) (collectively, the “Private Securities”) designated by the Seller a reasonable opportunity to conduct a due diligence investigation with respect to the Purchaser customary in scope for private offerings of such type of securities (including, without limitation, the availability of senior management to respond to questions regarding the business and financial condition of the Purchaser and the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), and the Seller (or any such potential buyer) shall be satisfied in all material respects with such opportunity and with the resolution of any disclosure issues arising from such due diligence investigation of the Purchaser.

          (b)          Prior to or contemporaneously with the determination of the Private Placement Price (as described below), the Purchaser shall enter into an agreement (a “Private Placement Agreement”) with the Seller (or any affiliate of the Seller designated by the Seller) providing for the purchase and resale by the Seller (or such affiliate) in a private placement (or other transaction exempt from registration under the Securities Act) of the Private Securities, which agreement shall be on commercially reasonable terms and in form and substance reasonably satisfactory to the Seller (or such affiliate) and (without limitation of the foregoing) shall:

          (i)          contain customary conditions, and customary undertakings, representations and warranties (to the Seller or such affiliate, and if requested by the Seller or such affiliate, to potential purchasers of the Private Securities);

          (ii)          contain indemnification and contribution provisions in connection with the potential liability of the Seller and its affiliates relating to the resale by the Seller (or such affiliate) of the Private Securities;

          (iii)          provide for all reasonable steps within the Purchaser’s control to be taken to provide for the delivery of related certificates and representations, warranties and agreements of the Purchaser, including those necessary or advisable to establish and maintain the availability of an exemption from the registration requirements of the Securities Act for the Seller and resales of the Private Securities by the Seller (or such affiliate); and

A-1

	(iv)          provide for all reasonable steps within the Purchaser’s control to be taken to provide for the delivery to the Seller (or such affiliate) of customary opinions (including, without limitation, opinions relating to the due authorization, valid issuance and fully paid and non-assessable nature of the Private Securities, the availability of an exemption from the Securities Act for the Seller and resales of the Private Securities by the Seller (or such affiliate), and the lack of material misstatements and omissions in the Purchaser’s filings under the Exchange Act).
(c)          The Seller shall determine the Private Placement Price (or, in the case of alternative termination settlement, the Termination Price) in its judgment by commercially reasonable means, which may include (without limitation):
	(i)          basing such price on indicative bids from investors;
	(ii)          taking into account any factors that are customary in pricing private sales for similarly situated issuers or securities, including, without limitation, a reasonable placement fee or spread to be retained by the Seller (or such affiliate); and
	(iii)          providing for the payment by the Purchaser of all reasonable fees and expenses in connection with such sale and resale, including all fees and expenses of counsel for the Seller or such affiliate.
(d)          The Seller shall notify the Purchaser of the number of Private Securities required to be delivered by the Purchaser and the Private Placement Price (or, in the case of alternative termination settlement, the Termination Price) by 6:00 p.m. on the day such price is determined.
(e)          The Purchaser agrees not to take or cause to be taken any action that would make unavailable either (i) the exemption set forth in Section 4(2) of the Securities Act, for the sale of any Private Securities by the Purchaser to the Seller or (ii) an exemption from the registration requirements of the Securities Act reasonably acceptable to the Seller for resales of Private Securities by the Seller.
(f)          The Purchaser expressly agrees and acknowledges that the public disclosure of all material information relating to the Purchaser is within the Purchaser’s control and that the Purchaser shall promptly so disclose all such material information during the period from the Valuation Completion Date to and including the Settlement Date.
The Purchaser agrees to use its best efforts to make any filings required to be made by it with the SEC, any securities exchange or any other regulatory body with respect to the Transaction contemplated hereby and the issuance of the Private Securities.

A-2

ANNEX B

REGISTRATION PROCEDURES

I. Introduction

          MTS Systems Corporation, a Minnesota corporation (the “Purchaser”) and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (the “Seller”) have agreed to these procedures (the “Registration Procedures”) in connection with entering into the Confirmation (the “Confirmation”) dated as of September 7, 2012 between JPMorgan and the Purchaser relating to the sale by JPMorgan to the Purchaser of common stock, par value $0.25 per share, or security entitlements in respect thereof (the “Common Stock”) of the Purchaser. These Registration Procedures supplement, form part of, and are subject to the Confirmation and all terms used and not otherwise defined herein shall have the meanings assigned to them in the Confirmation.

II. Procedures

          If the Purchaser elects to deliver Registered Shares pursuant to Section 3.01(b) of the Confirmation, the Purchaser shall effect such delivery in compliance with the registration procedures provided herein.

          (a)           The Purchaser shall take all actions within its control to make available to the Seller and its affiliates an effective primary registration statement under the Securities Act and one or more prospectuses as necessary or advisable to allow the Seller and its affiliates to comply with the applicable prospectus delivery requirements (the “Prospectus”) for the sale by Seller or its affiliates of the Registered Shares to be delivered by the Purchaser pursuant to the Confirmation (the “Registration Statement”), such Registration Statement to be effective and Prospectus to be current until all such sales by the Seller (or its affiliates) have been settled. The Purchaser shall take all actions reasonably requested by the Seller to facilitate the disposition of any Registered Shares to be sold pursuant to such Registration Statement.

          (b)          The Purchaser shall use commercially reasonable efforts to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Prospectus and, if any such order is issued, to obtain the lifting thereof as soon thereafter as is reasonably possible. If the Registration Statement, the Prospectus or any document incorporated therein by reference contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make any statement therein not misleading, the Purchaser shall as promptly as reasonably practicable file any required document and prepare and furnish to the Seller a reasonable number of copies of such supplement or amendment thereto as may be necessary so that the Prospectus, as thereafter delivered to the purchasers in connection with sales of Registered Shares thereunder, will not contain any misstatement of a material fact or omit to state a material fact required to be stated therein or necessary to make any statement therein not misleading.

          (c)          The Purchaser shall afford the Seller (and its agents and affiliates) a reasonable opportunity to conduct a due diligence investigation with respect to the Purchaser customary in scope for registered offerings of such type of securities (including, without limitation, the availability of senior management and external advisors to respond to questions regarding the business and financial condition of the Purchaser and the right to have made available to them for inspection all financial and other records, pertinent corporate documents and other information reasonably requested by them), and such opportunity and the resolution of any disclosure issues arising from such due diligence investigation of the Purchaser shall be satisfactory to Seller in all material respects. The Purchaser shall reimburse the Seller for all reasonable out-of-pocket expenses it incurs in connection with such diligence and otherwise in connection with the preparation of the Registration Statement and Prospectus, including, without limitation, the reasonable fees and expenses of outside counsel to the Seller incurred in connection therewith.

B-1

          (d)           The Purchaser shall enter into an agreement (a “Registration Agreement”) with the Seller (or any affiliate of the Seller designated by the Seller) providing for the registration of the Registered Shares, which agreement shall be on commercially reasonable terms and in form and substance reasonably satisfactory to the Seller (or such affiliate) and (without limitation of the foregoing) shall:

          (i)            contain customary conditions, and customary undertakings, representations and warranties (to the Seller or such affiliate);

          (ii)          contain indemnification and contribution provisions in connection with the potential liability of the Seller and its affiliates relating to the sale by the Seller (or such affiliate) of the Registered Shares;

          (iii)          provide for the delivery of related certificates and representations, warranties and agreements of the Purchaser;

          (iv)          provide for the delivery of accountants’ “comfort letters” to the Seller in form and substance satisfactory to the Seller, containing statements and information of the type customarily included in such letters to “underwriters” with respect to the financial statements and certain financial information contained, or incorporated by reference, in the Registration Statement and the Prospectus; and

        (v)          provide for the delivery to the Seller (or such affiliate) of customary opinions, including, without limitation, opinions relating to the due authorization, valid issuance and fully paid and non-assessable nature of the Registered Shares and the lack of material misstatements and omissions in the Registration Statement (including any documents incorporated by reference therein).

        (e)          The Seller shall notify the Purchaser of the numbers of Registered Shares to be delivered by the Purchaser on the Settlement Dates, as necessary in light of the Seller’s unwinding of its hedge positions in connection with the Transaction and sales of Registered Shares in accordance with these Registration Procedures, and the Purchaser shall deliver such Shares to the Seller on such Settlement Dates in accordance with the Seller’s customary procedures. The parties understand and acknowledge that (i) the Seller or its affiliates expect to make contemporaneous or nearly contemporaneous (A) purchases of Common Stock to unwind its hedge and (B) sales of Registered Shares in accordance with these Registration Procedures, (ii) the Seller or its affiliates intend to make such sales of Registered Shares in a manner that is not a distribution for purposes of Regulation M, and (iii) accordingly, the length of the period during which the Seller or its affiliates make such purchases and sales will depend in part on prevailing trading volumes for the Common Stock.

          (f)          In the event that (i) the Purchaser fails to comply with the requirements set forth in this Annex B, (ii) the Registration Statement is not effective on or prior to the date that is 30 days after the Valuation Completion Date, or fails to remain effective until all Registered Shares have been sold hereunder, (ii) the opportunity to conduct a due diligence investigation with respect to the Purchaser and the resolution of any issues arising therefrom is not satisfactory to Seller and its affiliates in all material respects, or does not continue to be satisfactory to the Seller and its affiliates in all material respects until all Registered Shares have been sold hereunder, (iv) the Seller or its affiliates are not able to make sales of Registered Shares in a manner that permits the contemporaneous or nearly contemporaneous purchase by the Seller or its affiliates of Common Stock in accordance with Regulation M or (v) the Registration Procedures otherwise become unavailable for the sale by the Seller and its affiliates of the Registered Shares delivered by the Purchaser hereunder prior to the completion of the sale thereof, then in any such event, the provisions of Section 3.01(d) of the Confirmation providing for cash settlement with respect to any unsold Registered Shares shall apply, appropriately modified to take into account any Registered Shares theretofore delivered and sold pursuant to these Registration Procedures.

B-2

ANNEX C

COMMUNICATIONS PROCEDURES

September 7, 2012

I. Introduction

          MTS Systems Corporation, a Minnesota corporation (“Counterparty”) and J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (“JPMorgan”) have adopted these communications procedures (the “Communications Procedures”) in connection with entering into the Confirmation (the “Confirmation”) dated as of September 7, 2012 between JPMorgan and Counterparty relating to the sale by JPMorgan to Counterparty of common stock, par value $0.25 per share, or security entitlements in respect thereof (the “Common Stock”) of the Counterparty. These Communications Procedures supplement, form part of, and are subject to the Confirmation.

II. Communications Rules

          From the date hereof until the end of the Contract Period, Counterparty and its Employees and Designees shall not engage in any Program-Related Communication with, or disclose any Material Non-Public Information to, any EDG Trading Personnel. Except as set forth in the preceding sentence, the Confirmation shall not limit Counterparty and its Employees and Designees in their communication with Affiliates and Employees of JPMorgan, including without limitation Employees who are EDG Permitted Contacts.

III. Termination

          If, in the sole judgment of any EDG Trading Personnel or any affiliate or Employee of JPMorgan participating in any Communication with Counterparty or any Employee or Designee of Counterparty, such Communication would not be permitted by these Communications Procedures, such EDG Trading Personnel or affiliate or Employee of JPMorgan shall immediately terminate such Communication. In such case, or if such EDG Trading Personnel or affiliate or Employee of JPMorgan determines following completion of any Communication with Counterparty or any Employee or Designee of Counterparty that such Communication was not permitted by these Communications Procedures, such EDG Trading Personnel or such affiliate or Employee of JPMorgan shall promptly consult with his or her supervisors and with counsel for JPMorgan regarding such Communication. If, in the reasonable judgment of JPMorgan’s counsel following such consultation, there is more than an insignificant risk that such Communication could materially jeopardize the availability of the affirmative defenses provided in Rule 10b5-1 under the Exchange Act with respect to any ongoing or contemplated activities of JPMorgan or its affiliates in respect of the Confirmation, it shall be an Additional Termination Event with respect to the Confirmation.

IV. Definitions

          Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Confirmation. As used herein, the following words and phrases shall have the following meanings:

          “Communication” means any contact or communication (whether written, electronic, oral or otherwise) between Counterparty or any of its Employees or Designees, on the one hand, and JPMorgan or any of its affiliates or Employees, on the other hand.

          “Designee” means a person designated, in writing or orally, by Counterparty to communicate with JPMorgan on behalf of Counterparty.

C-1

          “EDG Permitted Contact” means any of Mr. David Aidelson, Mr. Gregory Batista, Mr. Elliot Chalom, Mr. James Rothschild, Mr. David Seaman, Mr. Steven Seltzer, Mr. James F. Smith, Mr. Sudheer Tegulapalle and Mr. Jason M. Wood or any of their designees; provided that JPMorgan may amend the list of EDG Permitted Contacts by delivering a revised list of EDG Permitted Contacts to Counterparty.

          “EDG Trading Personnel” means Graham Orton, Michael Tatro and any other Employee of the public side of the Equity Derivatives Group or the Special Equities Group of J.P. Morgan Chase & Co.; provided that JPMorgan may amend the list of EDG Trading Personnel by delivering a revised list of EDG Trading Personnel to Counterparty; and provided further that, for the avoidance of doubt, the persons listed as EDG Permitted Contacts are not EDG Trading Personnel.

          “Employee” means, with respect to any entity, any owner, principal, officer, director, employee or other agent or representative of such entity, and any affiliate of any of such owner, principal, officer, director, employee, agent or representative.

          “Material Non-Public Information” means information relating to the Counterparty or the Common Stock that (a) has not been widely disseminated by wire service, in one or more newspapers of general circulation, by communication from the Counterparty to its shareholders or in a press release, or contained in a public filing made by the Counterparty with the Securities and Exchange Commission and (b) a reasonable investor might consider to be of importance in making an investment decision to buy, sell or hold shares of Common Stock. For the avoidance of doubt and solely by way of illustration, information should be presumed “material” if it relates to such matters as dividend increases or decreases, earnings estimates, changes in previously released earnings estimates, significant expansion or curtailment of operations, a significant increase or decline of orders, significant merger or acquisition proposals or agreements, significant new products or discoveries, extraordinary borrowing, major litigation, liquidity problems, extraordinary management developments, purchase or sale of substantial assets and similar matters.

          “Program-Related Communication” means any Communication the subject matter of which relates to the Confirmation or any Transaction under the Confirmation or any activities of JPMorgan (or any of its affiliates) in respect of the Confirmation or any Transaction under the Confirmation.

C-2

ANNEX D

PRICING SUPPLEMENT

          This Pricing Supplement is subject to the Confirmation dated as of September 7, 2012 (the “Confirmation”) between J.P. Morgan Securities LLC, as agent for JPMorgan Chase Bank, National Association, London Branch (the “Seller”), and MTS Systems Corporation, a Minnesota corporation (the “Purchaser”). Capitalized terms used herein have the meanings set forth in the Confirmation.

1	Discount:	$0.58
2	Initial Delivery Percentage	80%
3	Contract Fee:	$0.00
4	Floor Price:	$0.01
5	Registered Shares Fee:	$0.05
6	Valuation Completion Date:	The Trading Day, occurring during the period commencing on and including the 115th Trading Day following the Trade Date and ending on and including the Expiration Date, specified as such by the Seller, in its sole judgment, by delivering a notice designating such Trading Day as a Valuation Completion Date by the close of business on the Business Day immediately following such Trading Day; provided that if the Seller fails to validly designate the Valuation Completion Date prior to the Expiration Date, the Valuation Completion Date shall be the Expiration Date.
7	Cash Settlement Fee:	$0.00
8	Cash Distribution Amount:

Cash Distribution Amount	Reference Period
$0.00 per share of Common Stock	Trade Date – December 16, 2012
$0.30 per share of Common Stock	December 17, 2012 – March 10, 2013
$0.30 per share of Common Stock	Any period after March 11, 2013

D-1

EXHIBIT A

[Letterhead of Purchaser]

JPMorgan Chase Bank, National Association
c/o J.P. Morgan Securities LLC
383 Madison Avenue
5th Floor
New York, New York 10172

Re:          Accelerated Purchase of Equity Securities

Ladies and Gentlemen:

          In connection with our entry into the Confirmation dated as of September 7, 2012 (the “Confirmation”), we hereby represent that set forth below is the total number of shares of our common stock purchased by or for us or any of our affiliated purchasers in Rule 10b-18 purchases of blocks (all defined in Rule 10b-18 under the Securities Exchange Act of 1934) pursuant to the once-a-week block exception set forth in Rule 10b-18(b)(4) during the four full calendar weeks immediately preceding the first day of the [Valuation Period] [Cash Settlement Purchase Period] [Seller Termination Share Purchase Period] (as defined in the Confirmation) and the week during which the first day of the Valuation Period occurs.

          Number of Shares: __________________

          We understand that you will use this information in calculating trading volume for purposes of Rule 10b-18.

Very truly yours,

MTS SYSTEMS CORPORATION

By:
	Name:
	Title:

Exh-A-1

EX-10.2

Exhibit 10.2

	MTS Systems Corporation
	14000 Technology Drive
	Eden Prairie, MN 55344-2290
	Telephone 952-937-4000

February 25, 2013

Dr. William Bachrach
16 Donovan Drive
West Newburg, MA 01985

Dear Bill:

I am pleased to confirm our verbal offer to you for a position with MTS Systems Corporation, as a Senior Vice President – Sensors Division reporting to Jeff Graves. We anticipate your start date to be March 11, 2013.

Compensation:

Your starting salary will be $300,000 annually, less applicable withholding, and paid bi-weekly in accordance with the Company’s payroll procedures. You will also be eligible for the MTS Executive Variable Compensation (EVC) program beginning in Fiscal Year 2013 (October 1 through September 30). Your bonus target under this plan will be 50%, based on the base compensation paid during the fiscal year. Your bonus will be guaranteed for Fiscal Year 2013 based on your time covered under the plan.

Signing Bonus:

You will receive a signing bonus of $20,000 less applicable withholding, payable on the first payroll after your date of hire. If you voluntarily terminate your employment with MTS prior to completing one year of service, you will be required to reimburse MTS for the full amount of your sign-on bonus.

Stock Option:

You will receive a stock option grant of 6,750 options based on the closing price of the company’s Common Stock on the 15th day of the month after the calendar month in which your start date falls, or, if the 15th is a day on which the market is closed, the date used shall be the first prior business day in which the market was open. In the future, you will be eligible for an annual equity grant under a program approved by MTS’s Board of Directors.

Restricted Stock Units:

You will receive a Restricted Stock Unit (RSU) grant of 2,250 units based on the closing price of the company’s Common Stock on the 15th day of the month after the calendar month in which your start date falls, or, if the 15th is a day on which the market is closed, the date used shall be the first prior business day in which the market was open.

Benefits:

You will be eligible for company-sponsored health and life insurance benefits on your hire date. You will be eligible for a car allowance in the amount of $670 per month.

Agreements:

As a condition of your employment, you will be asked to sign the MTS Code of Conduct and MTS’ Standard Employee Agreement. You will also be provided a Change in Control and Limited Severance Agreement. These documents are provided for your review.

Bill, this offer of employment is contingent on successful completion of your background check and on your ability to provide documentary proof of your identity and your eligibility to work in the United States.

Exhibit 10.2

By accepting this offer, you confirm that you are able to accept this job and carry out the work that it would involve without breaching any legal restrictions on your activities, such as restrictions imposed by a current or former employer. You also confirm that you will inform MTS about any such restrictions and provide MTS with as much information about them as possible, including any agreements between you and your current or former employer describing such restrictions on your activities. You further confirm that you will not remove or take any documents or proprietary data or materials of any kind, electronic or otherwise, with you from your current or former employer to MTS without written authorization from your current or former employer. If you have any questions about the ownership of particular documents or other information, discuss such questions with your former employer before removing or copying the documents or information.

As a Named Executive Officer, this offer is subject to ratification of the Board of Directors Compensation Committee.

We are excited about the prospect of you joining our team. Please indicate by your signature below, your acceptance of this offer. Please sign and return this offer on February 25, 2013.

Sincerely,

/s/ Jeffrey A. Graves

Dr. Jeffrey A. Graves
President and Chief Executive Officer

Agreed and Accepted:

/s/ William Bachrach	2/25/2013
Dr. William Bachrach	Date Signed

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jeffrey A. Graves, certify that:

1.          I have reviewed this quarterly report on Form 10-Q of MTS Systems Corporation;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2013
	/s/ JEFFREY A. GRAVES
	Jeffrey A. Graves
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Susan E. Knight, certify that:

1.           I have reviewed this quarterly report on Form 10-Q of MTS Systems Corporation;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)          Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)          Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)          Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)          Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)          All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)          Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 6, 2013
	/s/ SUSAN E. KNIGHT
	Susan E. Knight
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

MTS SYSTEMS CORPORATION
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

The undersigned, Jeffrey A. Graves, the Chief Executive Officer of MTS Systems Corporation (the “Company” ), has executed this Certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2013 (the “Report” ).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2013
	/s/ JEFFREY A. GRAVES
	Jeffrey A. Graves
	President and Chief Executive Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

MTS SYSTEMS CORPORATION
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

The undersigned, Susan E. Knight, the Chief Financial Officer of MTS Systems Corporation (the “Company” ), has executed this Certification in connection with the filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2013 (the “Report”).

The undersigned hereby certifies that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 6, 2013
	/s/ SUSAN E. KNIGHT
	Susan E. Knight
	Senior Vice President and Chief Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended.

XML

Derivative Instruments and Hedging Activities (Pretax Amounts Recognized In Accumulated Other Comprehensive Income On Currency Contracts) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Derivative [Line Items]
Net gain (loss) recognized in OCI (effective portion)	$ 2,270	$ (192)	$ 3,545	$ 198
Currency exchange contracts [Member]
Derivative [Line Items]
Beginning unrealized net loss in AOCI	787	414	(648)	(365)
Net loss reclassified into Revenue (effective portion)	(920)	(273)	(760)	129
Net gain (loss) recognized in OCI (effective portion)	2,271	(153)	3,546	224
Ending unrealized net gain (loss) in AOCI	$ 2,138	$ (12)	$ 2,138	$ (12)

XML

Income Taxes (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 30, 2013	Sep. 29, 2012
Income Taxes [Abstract]
Unrecognized tax benefits	$ 2.0	$ 1.7
Unrecognized tax benefits that would favorably impact the effective tax rate on continuing operations	0.8	0.5
Tax benefit through R&D legislation	$ 1.3

XML

Financing (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Mar. 30, 2013	Sep. 29, 2012
Line of Credit Facility [Abstract]
Line of Credit Facility, Expiration Date	Sep. 01, 2017
Line of credit facility, borrowing capacity	$ 100
Letters of credit outstanding, amount	10.7	10.1
Line of credit facility, remaining borrowing capacity	$ 84.3	$ 89.9

XML

Capital Assets (Other Capital Assets) (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012	Sep. 29, 2012
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 33,283,000		$ 33,283,000		$ 33,194,000
Accumulated Amortization	(11,991,000)		(11,991,000)		(10,117,000)
Net Carrying Value	21,292,000		21,292,000		23,077,000
Weighted average useful life (in years)			14 years 3 months 18 days		14 years 3 months 18 days
Amortization expense	900,000	900,000	1,900,000	1,600,000
Software development costs [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	15,860,000		15,860,000		15,860,000
Accumulated Amortization	(7,504,000)		(7,504,000)		(6,125,000)
Net Carrying Value	8,356,000		8,356,000		9,735,000
Weighted average useful life (in years)			5 years 8 months 12 days		5 years 8 months 12 days
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	10,126,000		10,126,000		10,073,000
Accumulated Amortization	(3,248,000)		(3,248,000)		(2,871,000)
Net Carrying Value	6,878,000		6,878,000		7,202,000
Weighted average useful life (in years)			15 years 3 months 18 days		15 years 3 months 18 days
Trademarks and trade names [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	6,050,000		6,050,000		6,020,000
Accumulated Amortization	(1,128,000)		(1,128,000)		(1,024,000)
Net Carrying Value	4,922,000		4,922,000		4,996,000
Weighted average useful life (in years)			30 years 2 months 12 days		30 years 2 months 12 days
Land-use rights [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,247,000		1,247,000		1,241,000
Accumulated Amortization	(111,000)		(111,000)		(97,000)
Net Carrying Value	$ 1,136,000		$ 1,136,000		$ 1,144,000
Weighted average useful life (in years)			47 years 9 months 18 days		47 years 9 months 18 days

XML

Fair Value Measurements (Tables)

6 Months Ended

Mar. 30, 2013

Fair Value Measurements [Abstract]

Financial Assets And Liabilities Subject To Fair Value Measurements On A Recurring Basis

	March 30, 2013
		Level 1		Level 2		Level 3		Total
Assets:	(expressed in thousands)
Currency contracts(1)	$	-	$	2,002	$	-	$	2,002
Total assets	$	-	$	2,002	$	-	$	2,002
Liabilities:
Currency contracts(1)	$	-	$	169	$	-	$	169
Total liabilities	$	-	$	169	$	-	$	169

	September 29, 2012
		Level 1		Level 2		Level 3		Total
Assets:	(expressed in thousands)
Currency contracts(1)	$	-	$	432	$	-	$	432
Total assets	$	-	$	432	$	-	$	432
Liabilities:
Currency contracts(1)	$	-	$	1,572	$	-	$	1,572
Total liabilities	$	-	$	1,572	$	-	$	1,572

(1) Based on observable market transactions of spot currency rates and forward currency rates on equivalently-termed instruments.

XML

Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013		Sep. 29, 2012
Assets:
Currency contracts	$ 2,002	[1]	$ 432	[1]
Total assets	2,002		432
Liabilities:
Currency contracts	169	[1]	1,572	[1]
Total liabilities	169		1,572
Fair Value, Inputs, Level 2 [Member]
Assets:
Currency contracts	2,002	[1]	432	[1]
Total assets	2,002		432
Liabilities:
Currency contracts	169	[1]	1,572	[1]
Total liabilities	$ 169		$ 1,572

[1] Based on observable market transactions of spot currency rates and forward currency rates on equivalently-termed instruments.

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Derivative Instruments and Hedging Activities (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended				3 Months Ended	6 Months Ended
	Mar. 30, 2013	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013 Foreign Exchange Balance Sheet Derivative Contracts [Member]	Mar. 31, 2012 Foreign Exchange Balance Sheet Derivative Contracts [Member]	Mar. 31, 2012 Maximum [Member]	Mar. 30, 2013 Maximum [Member]	Mar. 31, 2012 Maximum [Member]	Mar. 30, 2013 Maximum [Member] Foreign Exchange Balance Sheet Derivative Contracts [Member]	Mar. 31, 2012 Maximum [Member] Foreign Exchange Balance Sheet Derivative Contracts [Member]
Derivative [Line Items]
Gross notional amount of foreign exchange derivatives outstanding	$ 46.2	$ 46.2	$ 37.0	$ 35.9	$ 38.1
Net notional amount of foreign exchange derivatives	42.8	42.8	34.9	11.3	11.8
Net market value of the foreign currency exchange contracts	1.9	1.9	0.1						0.1
Net market value of the foreign currency exchange contracts, Assets	2.0	2.0	0.3							0.1
Net market value of the foreign currency exchange contracts, Liabilities	0.1	0.1	0.4
Recognized in earnings as a result of the ineffectiveness of cash flow hedges	0.1	0.1				0.1		0.1
Amount projected to be reclassified from Accumulated Other Comprehensive Income into earnings		2.1	0.1
Maximum remaining maturity of any forward or optional contract derivatives (in years)							1 year 3 months 18 days	2 years 3 months 18 days
Notional amount of interest rate swaps derivatives outstanding			40.0
Basis Spread on variable rate			45.00%
Weighted average interest rate (in hundredths)			2.09%
Effective interest rate on credit facility borrowings (in hundredths)			2.54%
Total market value of interest rate swaps, Liability			$ 0.3

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Financing (Schedule Of Short-term Borrowings) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
Financing [Abstract]
Bank line of credit, swing line loan (3.25% rate in effect at March 30, 2013), maturing September 2017	$ 5,000
Notes payable, non-interest bearing		230
Total short-term borrowings	$ 5,000	$ 230
Swing line loan, rate	3.25%

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Capital Assets

6 Months Ended

Mar. 30, 2013

Capital Assets [Abstract]

Capital Assets

3. Capital Assets

Property and Equipment

Property and equipment at March 30, 2013 and September 29, 2012 consist of the following:

		March 30,		September 29,
		2013		2012
	(expressed in thousands)
Land and improvements	$	1,710	$	1,711
Buildings and improvements		53,574		53,545
Machinery and equipment		130,934		118,838
Total		186,218		174,094
Less accumulated depreciation		(116,912)		(112,441)
Property and equipment, net	$	69,306	$	61,653

Goodwill

Goodwill at March 30, 2013 and September 29, 2012 was $16.3 million and $16.2 million, respectively. The increase in goodwill during the six-fiscal month period ended March 30, 2013 was due to currency translation.

Other Intangible Assets

Other intangible assets at March 30, 2013 and September 29, 2012 consist of the following:

	March 30, 2013
							Weighted
							Average
		Gross Carrying		Accumulated		Net Carrying	Useful Life
		Amount		Amortization		Value	(in Years)
	(dollar amounts expressed in thousands)
Software development costs	$	15,860	$	(7,504)	$	8,356	5.7
Patents		10,126		(3,248)		6,878	15.3
Trademarks and trade names		6,050		(1,128)		4,922	30.2
Land-use rights		1,247		(111)		1,136	47.8
Total	$	33,283	$	(11,991)	$	21,292	14.3

	September 29, 2012
							Weighted
							Average
		Gross Carrying		Accumulated		Net Carrying	Useful Life
		Amount		Amortization		Value	(in Years)
	(dollar amounts expressed in thousands)
Software development costs	$	15,860	$	(6,125)	$	9,735	5.7
Patents		10,073		(2,871)		7,202	15.3
Trademarks and trade names		6,020		(1,024)		4,996	30.2
Land-use rights		1,241		(97)		1,144	47.8
Total	$	33,194	$	(10,117)	$	23,077	14.3

Amortization expense recognized during the three-fiscal month periods ended March 30, 2013 and March 31, 2012 was $0.9 million and $0.9 million, respectively.

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Other Comprehensive Income (Schedule Of Other Comprehensive Income (Loss)) Allocated To Each Component Of Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Other Comprehensive Income [Abstract]
Foreign currency translation adjustments, Pretax Amount	$ (3,584)	$ 772	$ (3,383)	$ (771)
Unrealized net (loss) gain, Pretax Amount	2,270	(192)	3,545	198
Net gain (loss) reclassified to earnings, Pretax Amount	(920)	(90)	(760)	488
Unrealized net gain (loss), Pretax Amount	(174)	(122)	43	130
Net loss reclassified to earnings, Pretax Amount	132	20	260	40
Currency exchange rate change, Pretax Amount	180	(54)	46	18
Other comprehensive income (loss), Pretax Amount	(2,096)	334	(249)	103
Unrealized net (loss) gain, Tax (Expense) or Benefit	(835)	72	(1,306)	(73)
Net gain reclassified to earnings, Tax (Expense) or Benefit	339	34	280	(181)
Unrealized net (loss) gain, Tax (Expense) or Benefit	52	53	(13)	(45)
Net loss reclassified to earnings, Tax (Expense) or Benefit	(41)	(6)	(79)	(12)
Other comprehensive income (loss), Tax (Expense) or Benefit	(485)	153	(1,118)	(311)
Foreign currency translation adjustments, Net of Tax Amount	(3,584)	772	(3,383)	(771)
Unrealized net (loss) gain, Net of Tax Amount	1,435	(120)	2,239	125
Net loss reclassified to earnings, Net of Tax Amount	(581)	(56)	(480)	307
Unrealized net gain, Net of Tax Amount	(122)	(69)	30	85
Defined Benefit Pension Plan Adjustments, Net Loss reclassified to earning	91	14	181	28
Currency exchange rate change, Net of Tax Amount	180	(54)	46	18
Other comprehensive (loss) income	$ (2,581)	$ 487	$ (1,367)	$ (208)

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Basis of Presentation (Narrative) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Basis of Presentation [Abstract]
Amortization expense on capitalized computer software	$ 0.7	$ 0.7	$ 1.4	$ 1.2
Life of warranty obligations, minimum (in months)	12 months		12 months
Life of warranty obligations for sales, maximum (in months)	24 months		24 months
Number of previous months historical warranty claims used to calculate warranty expense percentage (in months)	12 months		12 months

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Retirement Benefit Plan (Tables)

6 Months Ended

Mar. 30, 2013

Retirement Benefit Plan [Abstract]

Schedule Of Costs For The Retirement Benefit Plan

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Service cost	$	174	$	104	$	344	$	211
Interest cost		194		211		384		427
Expected return on plan assets		(175)		(167)		(345)		(338)
Net amortization and deferral		132		20		260		40
Net periodic benefit cost	$	325	$	168	$	643	$	340

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Other Comprehensive Income (Schedule Of Changes In Each Component Of Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Other Comprehensive Income [Abstract]
Foreign Currency Translation Adjustment, Beginning balance	$ 16,935	$ 17,314	$ 16,734	$ 18,857
Foreign Currency Translation Adjustments, Other comprehensive income (loss) before reclassifications	(3,584)	772	(3,383)	(771)
Foreign Currency Translation Adjustments, Other Comprehensive loss	(3,584)	772	(3,383)	(771)
Foreign Currency Translation Adjustment, Ending balance	13,351	18,086	13,351	18,086
Unrealized (Loss) Gain on Derivative Instruments, Beginning balance	497	(8)	(408)	(616)
Unrealized (Loss) Gain on Derivative Instruments, Other comprehensive loss before reclassifications	1,435	(120)	2,239	125
Unrealized (Loss) Gain on Derivative Instruments, Net loss reclassified to earning	(581)	(56)	(480)	307
Unrealized (Loss) Gain on Derivative Instruments, Other comprehensive income (loss)	854	(176)	1,759	432
Unrealized (Loss) Gain on Derivative Instruments, Ending balance	1,351	(184)	1,351	(184)
Defined Benefit Pension Plan Adjustments, Beginning balance	(5,317)	(1,712)	(5,425)	(1,952)
Defined Benefit Pension Plan Adjustments, Other Comprehensive income (loss) before reclassifications	58	(123)	76	103
Defined Benefit Pension Plan Adjustments, Net Loss reclassified to earning	(91)	(14)	(181)	(28)
Pension Benefit Plan Adjustments, Other comprehensive income (loss)	149	(109)	257	131
Defined Benefit Pension Plan Adjustments, Ending balance	(5,168)	(1,821)	(5,168)	(1,821)
Total, Beginning balance	12,115	15,594	10,901	16,289
Total, Other comprehensive income (loss) before reclassifications	(2,091)	529	(1,068)	(543)
Total, net loss reclassified to earning	(490)	(42)	(299)	335
Comprehensive income	(2,581)	487	(1,367)	(208)
Total, Ending balance	$ 9,534	$ 16,081	$ 9,534	$ 16,081

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Basis of Presentation (Inventories) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
Basis of Presentation [Abstract]
Customer projects in various stages of completion	$ 15,530	$ 17,704
Components, assemblies and parts	59,280	50,275
Total	$ 74,810	$ 67,979

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Basis of Presentation (Warranty Obligations) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Warranty provisions and claims [Roll Forward]
Beginning balance	$ 4,423	$ 4,595	$ 3,984	$ 5,290
Warranty provisions	1,454	1,094	3,146	1,483
Warranty claims	(1,544)	(1,565)	(2,826)	(2,583)
Adjustments to preexisting warranties	151	300	151	300
Currency translation	(46)	44	(17)	(22)
Ending balance	$ 4,438	$ 4,468	$ 4,438	$ 4,468

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Recent Accounting Pronouncements

6 Months Ended

Mar. 30, 2013

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

2. Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.” ASU No. 2011-08 amends Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and Other,” and provides an entity with the option of first performing a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after completion of the qualitative assessment, an entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value to the carrying amount of the reporting unit as described in ASC 350. Under the amendments in ASU No. 2011-08, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the first step of the two-step impairment test. The provisions of ASU No. 2011-08 are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company’s adoption of ASU No. 2011-08 during the first quarter of fiscal year 2013 did not impact the Company’s financial position, results of operations or cash flows.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220) - Presentation of Comprehensive Income.” ASU No. 2011-05 amends ASC Topic 220, “Comprehensive Income,” to allow an entity the option to present the components of net income and other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU No. 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ investment. The amendments to the ASC in ASU No. 2011-05 do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. In December 2011, the FASB issued ASU No. 2011-12, “Comprehensive Income (Topic 220)” which deferred certain provisions of ASU No. 2011-05 that specifically relate to the presentation of separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income for all periods presented. With the exception of the specific provisions deferred under ASU No. 2011-12, the provisions of ASU No. 2011-05 are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.In the first quarter of fiscal year 2013, with the exception of the provisions specifically deferred under ASU No. 2011-12, the Company adopted the provisions of ASU No. 2011-05 and elected to present the components of net income and comprehensive income in two separate but consecutive statements. As a result, the Company included a new financial statement labeled “Consolidated Statements of Comprehensive Income.” The adoption of ASU No. 2011-05 did not affect the Company’s financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting Amounts Reclassified Out of Accumulated Comprehensive Income” which requires an entity to present, either on the face of the statement where net income is presented or in the notes to the financial statements, significant amounts reclassified out of accumulated comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments to the ASC in ASU No. 2011-05 do not change the current requirements for reporting net income of other comprehensive income in the financial statements. The provisions of ASU No. 2013-02 are to be applied prospectively for reporting periods beginning after December 15, 2012. In the second quarter of fiscal year 2013, the Company adopted the provisions of ASU No. 2013-02 and elected to present significant amounts reclassified out of accumulated comprehensive income by the respective line items of net income in the Condensed Notes to the Consolidated Financial Statements. The adoption of ASU No. 2013-02 did not affect the Company’s financial position, results of operations or cash flows.

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Capital Assets (Property and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 186,218	$ 174,094
Less accumulated depreciation	(116,912)	(112,441)
Property and equipment, net	69,306	61,653
Goodwill	16,310	16,239
Land and improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,710	1,711
Building and improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	53,574	53,545
Machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 130,934	$ 118,838

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Derivative Instruments and Hedging Activities (Pre-tax Amounts Recognized In Accumulated Other Comprehensive Income On Interest Rate Swaps) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Derivative [Line Items]
Net loss recognized in OCI (effective portion)	$ 2,270	$ (192)	$ 3,545	$ 198
Interest Rate Swaps and Forward Interest Rate Swaps [Member]
Derivative [Line Items]
Beginning unrealized net loss in AOCI		(427)		(617)
Net gain reclassified into interest expense (effective portion)		183		359
Net loss recognized in OCI (effective portion)		(38)		(24)
Ending unrealized net gain (loss) in AOCI		$ (282)		$ (282)

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Consolidated Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
Current Assets:
Cash and cash equivalents	$ 46,612	$ 79,852
Accounts receivable, net of allowances for doubtful accounts of $1,915 and $2,247, respectively	104,732	84,119
Unbilled accounts receivable	57,634	51,306
Inventories	74,810	67,979
Prepaid expenses and other current assets	12,632	6,982
Deferred income taxes	9,846	10,665
Total current assets	306,266	300,903
Property and equipment, net	69,306	61,653
Goodwill	16,310	16,239
Other intangible assets, net	21,292	23,077
Other assets	4,312	4,696
Deferred income taxes	2,583	2,870
Total Assets	420,069	409,438
Current Liabilities:
Short-term borrowings	5,000	230
Accounts payable	28,748	33,744
Accrued payroll and related costs	25,931	30,731
Advance payments from customers	63,470	65,833
Accrued warranty costs	4,438	3,984
Accrued income taxes	2,712	3,510
Deferred income taxes	2,642	2,627
Other accrued liabilities	18,309	19,573
Total current liabilities	151,250	160,232
Deferred income taxes	8,670	8,671
Non-current accrued income taxes	2,019	1,666
Defined benefit pension plan obligation	7,753	7,761
Other long-term liabilities	3,521	4,389
Total Liabilities	173,213	182,719
Shareholders' Investment:
Common stock, $0.25 par; 64,000 shares authorized: 15,760 and 15,640 shares issued and outstanding as of March 30, 2013 and September 29, 2012, respectively	3,940	3,910
Additional paid-in capital	6,727	652
Retained earnings	226,655	211,256
Accumulated other comprehensive income	9,534	10,901
Total Shareholders' Investment	246,856	226,719
Total Liabilities and Shareholders' Investment	$ 420,069	$ 409,438

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Other Comprehensive Income (Schedule Of Amounts Reclassified Out Of Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Revenue	$ 136,917	$ 129,019	$ 279,585	$ 262,716
Interest expense, net	(150)	(212)	(144)	(418)
Cost of sales	73,559	64,648	149,519	131,520
Selling and marketing	19,519	19,206	38,698	36,215
General and administrative	13,175	13,917	25,489	27,113
Actuarial losses	132	20	260	40
Income tax (expense) benefit	3,458	5,431	10,190	13,212
Reclassification Out Of Accumulated Other Comprehensive Income [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Total net gains (losses) included in net income	490	42	299	(335)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Total net losses included in income before income taxes	920	90	760	(488)
Income tax (expense) benefit	(339)	(34)	(280)	181
Total net gains (losses) included in net income	581	56	480	(307)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member] | Interest Rate Swap [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Interest expense, net		(183)		(359)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member] | Currency exchange contracts [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Revenue	920	273	760	(129)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Total net losses included in income before income taxes	(132)	(20)	(260)	(40)
Income tax (expense) benefit	41	6	79	12
Total net gains (losses) included in net income	(91)	(14)	(181)	(28)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member] | Cost of Sales [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Actuarial losses	(44)	(7)	(85)	(13)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member] | Selling and Marketing Expense [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Actuarial losses	(39)	(6)	(78)	(12)
Reclassification Out Of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment [Member] | General and Administrative Expense [Member]
Reclassification Out Of Accumulated Other Comprehensive Income [Line Items]
Actuarial losses	$ (49)	$ (7)	$ (97)	$ (15)

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Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net income	$ 24,844	$ 26,696
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Stock-based compensation	2,153	1,818
Excess tax benefits from stock-based compensation	(568)	(648)
Net periodic pension benefit cost	643	340
Depreciation and amortization	7,712	6,447
Deferred income taxes	932	131
Bad debt (recovery) provision	(239)	758
Changes in operating assets and liabilities:
Accounts and unbilled contracts receivable	(29,155)	(8,680)
Inventories	(7,061)	(4,484)
Prepaid expenses	(2,144)	(2,046)
Accounts payable	(4,801)	692
Accrued payroll and related costs	(3,443)	(6,721)
Advance payments from customers	(2,410)	9,217
Accrued warranty costs	471	(799)
Other assets and liabilities	(2,472)	(3,152)
Net cash (used in) provided by operating activities	(15,538)	19,569
Cash flows from investing activities:
Purchases of property and equipment	(14,420)	(6,703)
Cash flows from financing activities:
Receipts under short-term borrowings	10,000	15
Payments under short-term borrowings	(5,283)
Excess tax benefits from stock-based compensation	568	648
Cash dividends	(9,670)	(7,950)
Proceeds from exercise of stock options and employee stock purchase plan	3,403	13,950
Net cash (used in) provided by financing activities	(982)	6,663
Effect of exchange rate on changes in cash	(2,300)	(376)
Net (decrease) increase in cash and cash equivalents	(33,240)	19,153
Cash and cash equivalents, at beginning of period	79,852	104,095
Cash and cash equivalents, at end of period	46,612	123,248
Cash paid during the period for -
Interest	36	523
Income taxes	12,383	17,304
Non-cash financing activities:
Dividends declared not yet paid	$ 4,633	$ 3,905

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Earnings Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Earnings Per Common Share [Abstract]
Net income	$ 11,061	$ 11,157	$ 24,844	$ 26,696
Weighted average common shares outstanding	15,723,000	15,906,000	15,696,000	15,793,000
Dilutive potential common shares	205,000	200,000	191,000	176,000
Total diluted weighted average shares outstanding	15,928,000	16,106,000	15,887,000	15,969,000
Earnings Per Share, Basic	$ 0.70	$ 0.70	$ 1.58	$ 1.69
Earnings Per Share, Diluted	$ 0.69	$ 0.69	$ 1.56	$ 1.67
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	100,000	100,000	100,000	400,000

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Earnings Per Common Share (Tables)

6 Months Ended

Mar. 30, 2013

Earnings Per Common Share [Abstract]

Schedule Of Earnings Per Share, Basic And Diluted

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands, except per share data)
Net income	$	11,061	$	11,157	$	24,844	$	26,696
Weighted average common shares outstanding		15,723		15,906		15,696		15,793
Dilutive potential common shares		205		200		191		176
Total diluted weighted shares outstanding		15,928		16,106		15,887		15,969
Earnings per share:
Basic	$	0.70	$	0.70	$	1.58	$	1.69
Diluted	$	0.69	$	0.69	$	1.56	$	1.67

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Business Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013 segment	Mar. 31, 2012
Segment Reporting, Reconciliation of Financial Information from Segments to Consolidated[Line Items]
Number of operating segments			2
Revenue	$ 136,917	$ 129,019	$ 279,585	$ 262,716
Income from operations	15,623	17,199	35,680	40,748
Test [Member]
Segment Reporting, Reconciliation of Financial Information from Segments to Consolidated[Line Items]
Revenue	113,943	102,913	235,046	211,541
Income from operations	12,006	10,694	28,397	28,467
Sensors [Member]
Segment Reporting, Reconciliation of Financial Information from Segments to Consolidated[Line Items]
Revenue	22,974	26,106	44,539	51,175
Income from operations	$ 3,617	$ 6,505	$ 7,283	$ 12,281

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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Mar. 30, 2013

Derivative Instruments and Hedging Activities [Abstract]

Fair Value Of Outstanding Designated And Undesignated Derivative Assets And Liabilities

	March 30, 2013
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	2,002	$	116
Total designated hedge derivatives		2,002		116
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		53
Total hedge and other derivatives	$	2,002	$	169

	September 29, 2012
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	432	$	1,157
Total designated hedge derivatives		432		1,157
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		415
Total hedge and other derivatives	$	432	$	1,572

Pretax Amounts Recognized In Accumulated Other Comprehensive Income On Currency Contracts

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Beginning unrealized net gain (loss) in AOCI	$	787	$	414	$	(648)	$	(365)
Net (gain) loss reclassified into Revenue (effective portion)		(920)		(273)		(760)		129
Net gain (loss) recognized in OCI (effective portion)		2,271		(153)		3,546		224
Ending unrealized net gain (loss) in AOCI	$	2,138	$	(12)	$	2,138	$	(12)

Pre-tax Amounts Recognized In Accumulated Other Comprehensive Income On Interest Rate Swaps

	Three Fiscal		Six Fiscal
	Months Ended		Months Ended
		March 31,		March 31,
		2012		2012
	(expressed in thousands)
Beginning unrealized net loss in AOCI	$	(427)	$	(617)
Net loss reclassified into Interest expense (effective portion)		183		359
Net loss recognized in OCI (effective portion)		(38)		(24)
Ending unrealized net loss in AOCI	$	(282)	$	(282)

Net Gains (Losses) Recognized In Income For Derivative Contracts

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Net (loss) gain recognized in Other expense, net	$	(218)	$	205	$	(272)	$	199

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Basis of Presentation

6 Months Ended

Mar. 30, 2013

Basis of Presentation [Abstract]

Basis of Presentation

1. Basis of Presentation

The consolidated financial statements include the accounts of MTS Systems Corporation and its wholly owned subsidiaries (the “Company”). All significant intercompany balances and transactions have been eliminated.

The interim consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished in these consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. The consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the Company to make estimates and assumptions that affect amounts reported. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations. The accompanying consolidated financial statements of the Company should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2012 filed with the SEC. Interim results of operations for the three and six-fiscal month period ended March 30, 2013 are not necessarily indicative of the results to be expected for the full year.

Summary of Significant Accounting Policies

The Company believes that of its significant accounting policies, the following are particularly important to the portrayal of the Company’s results of operations and financial position and may require the application of a higher level of judgment by the Company’s management and, as a result, are subject to an inherent degree of uncertainty.

Revenue Recognition.  The Company recognizes revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer has occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled.

Orders that are manufactured and delivered in less than six months with routine installations and no special acceptance protocols may contain multiple elements for revenue recognition purposes. The Company considers each deliverable that provides value to the customer on a standalone basis a separable element. Separable elements in these arrangements may include the design and manufacture of hardware and essential software, installation services, training and/or post contract software maintenance and support. The Company initially allocates consideration to each separable element using the relative selling price method. Selling prices are determined by the Company based on either vendor-specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, the Company’s best estimate of the selling price. Factors considered by the Company in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by the Company to provide the deliverable, as well as the Company’s historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training are not considered separable. Accordingly, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer.

Certain contractual arrangements require longer production periods, generally longer than six months (long-term contracts), and may contain non-routine installations and special acceptance protocols. These arrangements often include hardware and essential software, installation services, training and support. Long-term contractual arrangements involving essential software typically include significant production, modification, and customization. For long-term arrangements with essential software and all other long-term arrangements with complex installations and/or unusual acceptance protocols, revenue is recognized using the percentage-of-completion method, based on the cost incurred to-date relative to estimated total cost of the contract. Elements of an arrangement that do not separately fall within the scope of the percentage of completion method (e.g. training and post contract software maintenance and support) are recognized as the service is provided in amounts determined based on VSOE, or in the absence of VSOE, the Company’s best estimate of the selling price.

Under the terms of the Company’s long-term contracts, revenue recognized using the percentage-of-completion method may not, in certain circumstances, be invoiced until completion of contractual milestones, upon shipment of the equipment, or upon installation and acceptance by the customer. Unbilled amounts for these contracts appear in the Consolidated Balance Sheets as Unbilled Accounts Receivable.

Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. Revenue from post-contract software maintenance and support services is recognized ratably over the defined contractual period of the maintenance agreement.

The Company’s sales arrangements typically do not include specific performance-, cancellation-, termination-, or refund-type provisions. In the event a customer cancels a contractual arrangement, the Company would typically be entitled to receive reimbursement from the customer for actual costs incurred under the arrangement plus a reasonable margin.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant governmental authority.

Inventories.  Inventories consist of material, labor and overhead costs and are stated at the lower of cost or market, determined under the first-in, first-out accounting method. Inventories at March 30, 2013 and September 29, 2012 were as follows:

	March 30,		September 29,
	2013		2012
		(expressed in thousands)
Customer projects in various stages of completion	$	15,530	$	17,704
Components, assemblies and parts		59,280		50,275
Total	$	74,810	$	67,979

Software Development Costs.The Company capitalizes certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials and services, salary and benefits of the Company’s development and technical support staff, and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on the Company’s product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and the Company has established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product’s estimated economic life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition.

The Company’s capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value will be expensed in the period such a determination is made. Amortization expense for software development costs for the three-fiscal month periods ended March 30, 2013 and March 31, 2012 was $0.7 million and $0.7 million, respectively. Amortization expense for software development costs for the six-fiscal month periods ended March 30, 2013 and March 31, 2012 was $1.4 million and $1.2 million, respectively. See Note 3 in the Condensed Notes to Consolidated Financial Statements for additional information on capitalized software development costs.

Impairment of Long-Lived Assets.  The Company reviews the carrying value of long-lived assets or asset groups, such as property and equipment and intangibles subject to amortization, when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. When this review indicates the carrying value of an asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group, the Company recognizes an asset impairment charge against operations. The amount of the impairment loss recorded is the amount by which the carrying value of the impaired asset or asset group exceeds its fair value.

Goodwill.Goodwill represents the excess of acquisition costs over the fair value of the net assets of businesses acquired. Goodwill is not amortized to income, but instead tested for impairment at least annually, during the fourth quarter of each fiscal year. Goodwill is also tested for impairment as changes in circumstances occur indicating that the carrying value may not be recoverable. Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired.

Warranty Obligations.  Sales of the Company’s products and systems are subject to limited warranty obligations that are included in customer contracts. For sales that include installation services, warranty obligations typically extend for a period of twelve to twenty-four months from the date of either shipment or acceptance. Product obligations typically extend for a period of twelve to twenty-four months from the date of purchase. Under the terms of these warranties, the Company is obligated to repair or replace any components or assemblies it deems defective due to workmanship or materials. The Company reserves the right to reject warranty claims where it determines that failure is due to normal wear, customer modifications, improper maintenance, or misuse. The Company records general warranty provisions based on an estimated warranty expense percentage applied to current period revenue. The percentage applied reflects historical warranty claims experience over the preceding twelve-month period. Both the experience percentage and the warranty liability are evaluated on an ongoing basis for adequacy. In addition, warranty provisions are also recognized for certain nonrecurring product claims that are individually significant. Warranty provisions and claims for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 were as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Beginning balance	$	4,423	$	4,595	$	3,984	$	5,290
Warranty provisions		1,454		1,094		3,146		1,483
Warranty claims		(1,544)		(1,565)		(2,826)		(2,583)
Adjustments to preexisting warranties		151		300		151		300
Currency translation		(46)		44		(17)		(22)
Ending balance	$	4,438	$	4,468	$	4,438	$	4,468

Income Taxes.The Company records a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of its deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results. See Note 11 in the Condensed Notes to Consolidated Financial Statements for additional information on income taxes.

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
ASSETS
Accounts receivable, allowances for doubtful accounts	$ 1,915	$ 2,247
Shareholders' Investment:
Common stock, par value (in dollars per share)	$ 0.25	$ 0.25
Common stock, shares authorized (in shares)	64,000	64,000
Common stock, shares issued (in shares)	15,760	15,640
Common stock, shares outstanding (in shares)	15,760	15,640

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Income Taxes

6 Months Ended

Mar. 30, 2013

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

As of March 30, 2013, the Company’s liability for unrecognized tax benefits was $2.0 million, of which $0.8 million would favorably affect the Company’s effective tax rate if recognized. At September 29, 2012, the Company’s liability for unrecognized tax benefits was $1.7 million, of which $0.5 million would favorably affect the Company’s effective tax rate if recognized. As of March 30, 2013, the Company does not expect significant changes in the amount of unrecognized tax benefits during the next twelve months.

On January 2, 2013, the American Taxpayer Relief Act of 2012 (Act) was signed into law. The Act includes legislation that reinstated the United States Research and Development (R&D) tax credit retroactively from January 1, 2012 and extends it through December 31, 2013. As a result of this legislation, the Company recognized a tax benefit of approximately $1.3 million during the second quarter of fiscal year 2013.

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Document and Entity Information	6 Months Ended
	Mar. 30, 2013	May 03, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	MTS SYSTEMS CORP
Entity Central Index Key	0000068709
Current Fiscal Year End Date	--09-28
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		15,808,560
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 30, 2013

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Retirement Benefit Plan

6 Months Ended

Mar. 30, 2013

Retirement Benefit Plan [Abstract]

Retirement Benefit Plan

12. Retirement Benefit Plan

One of the Company’s German subsidiaries has a non-contributory, defined benefit retirement plan for eligible employees. This plan provides benefits based on the employee’s years of service and compensation during the years immediately preceding retirement, early retirement, termination, disability, or death, as defined in the plan.

The cost for the plan for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012included the following components:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Service cost	$	174	$	104	$	344	$	211
Interest cost		194		211		384		427
Expected return on plan assets		(175)		(167)		(345)		(338)
Net amortization and deferral		132		20		260		40
Net periodic benefit cost	$	325	$	168	$	643	$	340

The weighted average expected long-term rate of return on plan assets used to determine the net periodic benefit cost for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was 5.2% and5.4%, respectively.

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Consolidated Statements of Income (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Revenue:
Product	$ 119,793	$ 112,788	$ 244,414	$ 230,239
Service	17,124	16,231	35,171	32,477
Total revenue	136,917	129,019	279,585	262,716
Cost of sales:
Product	73,559	64,648	149,519	131,520
Service	9,453	7,981	19,559	16,093
Total cost of sales	83,012	72,629	169,078	147,613
Gross profit	53,905	56,390	110,507	115,103
Operating expenses:
Selling and marketing	19,519	19,206	38,698	36,215
General and administrative	13,175	13,917	25,489	27,113
Research and development	5,588	6,068	10,640	11,027
Total operating expenses	38,282	39,191	74,827	74,355
Income from operations	15,623	17,199	35,680	40,748
Interest expense, net	(150)	(212)	(144)	(418)
Other expense, net	(954)	(399)	(502)	(422)
Income before income taxes	14,519	16,588	35,034	39,908
Provision for income taxes	3,458	5,431	10,190	13,212
Net income	$ 11,061	$ 11,157	$ 24,844	$ 26,696
Basic-
Earnings per share (in dollars per share)	$ 0.70	$ 0.70	$ 1.58	$ 1.69
Weighted average number of common shares outstanding - basic (in shares)	15,723	15,906	15,696	15,793
Diluted-
Earnings per share (in dollars per share)	$ 0.69	$ 0.69	$ 1.56	$ 1.67
Weighted average number of common shares outstanding - diluted (in shares)	15,928	16,106	15,887	15,969
Dividends declared per share (in dollars per share)	$ 0.30	$ 0.25	$ 0.60	$ 0.50

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Business Segment Information

6 Months Ended

Mar. 30, 2013

Business Segment Information [Abstract]

Business Segment Information

6. Business Segment Information

The Company’s Chief Executive Officer and management regularly review financial information for the Company’s two operating segments, “Test” and “Sensors.” Test provides testing equipment, systems, and services to the ground vehicles, materials and structures markets. Sensors provides high-performance position sensors for a variety of industrial and mobile hydraulic applications.

The accounting policies of the reportable segments are the same as those described in Note 1 to the Consolidated Financial Statements found in the Company’s Annual Report on Form 10-K for the fiscal year ended September 29, 2012. In evaluating each segment’s performance, management focuses on income from operations. This measure excludes interest income and expense, income taxes and other non-operating items. Corporate expenses, including costs associated with various support functions such as human resources, information technology, finance and accounting, and general and administrative costs, are allocated to the reportable segments primarily on the basis of revenue.

Financial information by reportable segment for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Revenue by Segment:
Test	$	113,943	$	102,913	$	235,046	$	211,541
Sensors		22,974		26,106		44,539		51,175
Total revenue	$	136,917	$	129,019	$	279,585	$	262,716
Income from Operations by Segment:
Test	$	12,006	$	10,694	$	28,397	$	28,467
Sensors		3,617		6,505		7,283		12,281
Total income from operations	$	15,623	$	17,199	$	35,680	$	40,748

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Earnings Per Common Share

6 Months Ended

Mar. 30, 2013

Earnings Per Common Share [Abstract]

Earnings Per Common Share

5. Earnings Per Common Share

Basic earnings per share are computed by dividing net earnings by the daily weighted average number of common shares outstanding during the applicable periods. Diluted earnings per share include the potentially dilutive effect of common shares issued in connection with outstanding stock-based compensation awards, using the treasury stock method. Under the treasury stock method, shares associated with certain stock options have been excluded from the diluted weighted average shares outstanding calculation because the exercise of those options would lead to a net reduction in common shares outstanding. As a result, stock options to acquire less than 0.1 million weighted common shares have been excluded from diluted weighted shares outstanding for both the three-fiscal month periods ended March 30, 2013 and March 31, 2012, respectively. Stock options to acquire less than 0.1 million and 0.4 million weighted average common shares have been excluded from diluted weighted average shares outstanding for the six-month fiscal periods ended March 30, 2013 and March 31, 2012, respectively. The potentially dilutive effect of common shares issued in connection with outstanding stock options is determined based on net income. A reconciliation of these amounts is as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands, except per share data)
Net income	$	11,061	$	11,157	$	24,844	$	26,696
Weighted average common shares outstanding		15,723		15,906		15,696		15,793
Dilutive potential common shares		205		200		191		176
Total diluted weighted shares outstanding		15,928		16,106		15,887		15,969
Earnings per share:
Basic	$	0.70	$	0.70	$	1.58	$	1.69
Diluted	$	0.69	$	0.69	$	1.56	$	1.67

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Business Segment Information (Tables)

6 Months Ended

Mar. 30, 2013

Business Segment Information [Abstract]

Financial Information By Reportable Segment

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Revenue by Segment:
Test	$	113,943	$	102,913	$	235,046	$	211,541
Sensors		22,974		26,106		44,539		51,175
Total revenue	$	136,917	$	129,019	$	279,585	$	262,716
Income from Operations by Segment:
Test	$	12,006	$	10,694	$	28,397	$	28,467
Sensors		3,617		6,505		7,283		12,281
Total income from operations	$	15,623	$	17,199	$	35,680	$	40,748

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Basis of Presentation (Policies)

6 Months Ended

Mar. 30, 2013

Basis of Presentation [Abstract]

Revenue Recognition

Revenue Recognition.  The Company recognizes revenue on a sales arrangement when it is realized or realizable and earned, which occurs when all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery and title transfer has occurred or services have been rendered; the sales price is fixed and determinable; collectability is reasonably assured; and all significant obligations to the customer have been fulfilled.

Orders that are manufactured and delivered in less than six months with routine installations and no special acceptance protocols may contain multiple elements for revenue recognition purposes. The Company considers each deliverable that provides value to the customer on a standalone basis a separable element. Separable elements in these arrangements may include the design and manufacture of hardware and essential software, installation services, training and/or post contract software maintenance and support. The Company initially allocates consideration to each separable element using the relative selling price method. Selling prices are determined by the Company based on either vendor-specific objective evidence (“VSOE”) (the actual selling prices of similar products and services sold on a standalone basis) or, in the absence of VSOE, the Company’s best estimate of the selling price. Factors considered by the Company in determining estimated selling prices for applicable elements generally include overall economic conditions, customer demand, costs incurred by the Company to provide the deliverable, as well as the Company’s historical pricing practices. Under these arrangements, revenue associated with each delivered element is recognized in an amount equal to the lesser of the consideration initially allocated to the delivered element or the amount for which payment is not deemed contingent upon future delivery of other elements in the arrangement. Under arrangements where special acceptance protocols exist, installation services and training are not considered separable. Accordingly, revenue for the entire arrangement is recognized upon the completion of installation, training and fulfillment of any other significant obligations specific to the terms of the arrangement. Arrangements that do not contain any separable elements are typically recognized when the products are shipped and title has transferred to the customer.

Certain contractual arrangements require longer production periods, generally longer than six months (long-term contracts), and may contain non-routine installations and special acceptance protocols. These arrangements often include hardware and essential software, installation services, training and support. Long-term contractual arrangements involving essential software typically include significant production, modification, and customization. For long-term arrangements with essential software and all other long-term arrangements with complex installations and/or unusual acceptance protocols, revenue is recognized using the percentage-of-completion method, based on the cost incurred to-date relative to estimated total cost of the contract. Elements of an arrangement that do not separately fall within the scope of the percentage of completion method (e.g. training and post contract software maintenance and support) are recognized as the service is provided in amounts determined based on VSOE, or in the absence of VSOE, the Company’s best estimate of the selling price.

Under the terms of the Company’s long-term contracts, revenue recognized using the percentage-of-completion method may not, in certain circumstances, be invoiced until completion of contractual milestones, upon shipment of the equipment, or upon installation and acceptance by the customer. Unbilled amounts for these contracts appear in the Consolidated Balance Sheets as Unbilled Accounts Receivable.

Revenue from arrangements for services such as maintenance, repair, consulting and technical support are recognized either as the service is performed or ratably over the defined contractual period for service maintenance contracts. Revenue from post-contract software maintenance and support services is recognized ratably over the defined contractual period of the maintenance agreement.

The Company’s sales arrangements typically do not include specific performance-, cancellation-, termination-, or refund-type provisions. In the event a customer cancels a contractual arrangement, the Company would typically be entitled to receive reimbursement from the customer for actual costs incurred under the arrangement plus a reasonable margin.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant governmental authority.

Inventories

Inventories.  Inventories consist of material, labor and overhead costs and are stated at the lower of cost or market, determined under the first-in, first-out accounting method. Inventories at March 30, 2013 and September 29, 2012 were as follows:

	March 30,		September 29,
	2013		2012
		(expressed in thousands)
Customer projects in various stages of completion	$	15,530	$	17,704
Components, assemblies and parts		59,280		50,275
Total	$	74,810	$	67,979

Software Development Costs

Software Development Costs.The Company capitalizes certain software development costs related to software to be sold, leased, or otherwise marketed. Capitalized software development costs include purchased materials and services, salary and benefits of the Company’s development and technical support staff, and other costs associated with the development of new products and services. Software development costs are expensed as incurred until technological feasibility has been established, at which time future costs incurred are capitalized until the product is available for general release to the public. Based on the Company’s product development process, technological feasibility is generally established once product and detailed program designs have been completed, uncertainties related to high-risk development issues have been resolved through coding and testing, and the Company has established that the necessary skills, hardware, and software technology are available for production of the product. Once a software product is available for general release to the public, capitalized development costs associated with that product will begin to be amortized to cost of sales over the product’s estimated economic life, using the greater of straight-line or a method that results in cost recognition in future periods that is consistent with the anticipated timing of product revenue recognition.

The Company’s capitalized software development costs are subject to an ongoing assessment of recoverability, which is impacted by estimates and assumptions of future revenues and expenses for these software products, as well as other factors such as changes in product technologies. Any portion of unamortized capitalized software development costs that are determined to be in excess of net realizable value will be expensed in the period such a determination is made. Amortization expense for software development costs for the three-fiscal month periods ended March 30, 2013 and March 31, 2012 was $0.7 million and $0.7 million, respectively. Amortization expense for software development costs for the six-fiscal month periods ended March 30, 2013 and March 31, 2012 was $1.4 million and $1.2 million, respectively. See Note 3 in the Condensed Notes to Consolidated Financial Statements for additional information on capitalized software development costs.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets.  The Company reviews the carrying value of long-lived assets or asset groups, such as property and equipment and intangibles subject to amortization, when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable. When this review indicates the carrying value of an asset or asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group, the Company recognizes an asset impairment charge against operations. The amount of the impairment loss recorded is the amount by which the carrying value of the impaired asset or asset group exceeds its fair value.

Goodwill

Goodwill.Goodwill represents the excess of acquisition costs over the fair value of the net assets of businesses acquired. Goodwill is not amortized to income, but instead tested for impairment at least annually, during the fourth quarter of each fiscal year. Goodwill is also tested for impairment as changes in circumstances occur indicating that the carrying value may not be recoverable. Goodwill impairment testing first requires a comparison of the fair value of each reporting unit to the carrying value. If the carrying value of the reporting unit exceeds fair value, goodwill is considered impaired.

Warranty Obligations

Warranty Obligations.  Sales of the Company’s products and systems are subject to limited warranty obligations that are included in customer contracts. For sales that include installation services, warranty obligations typically extend for a period of twelve to twenty-four months from the date of either shipment or acceptance. Product obligations typically extend for a period of twelve to twenty-four months from the date of purchase. Under the terms of these warranties, the Company is obligated to repair or replace any components or assemblies it deems defective due to workmanship or materials. The Company reserves the right to reject warranty claims where it determines that failure is due to normal wear, customer modifications, improper maintenance, or misuse. The Company records general warranty provisions based on an estimated warranty expense percentage applied to current period revenue. The percentage applied reflects historical warranty claims experience over the preceding twelve-month period. Both the experience percentage and the warranty liability are evaluated on an ongoing basis for adequacy. In addition, warranty provisions are also recognized for certain nonrecurring product claims that are individually significant. Warranty provisions and claims for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 were as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Beginning balance	$	4,423	$	4,595	$	3,984	$	5,290
Warranty provisions		1,454		1,094		3,146		1,483
Warranty claims		(1,544)		(1,565)		(2,826)		(2,583)
Adjustments to preexisting warranties		151		300		151		300
Currency translation		(46)		44		(17)		(22)
Ending balance	$	4,438	$	4,468	$	4,438	$	4,468

Income Taxes

Income Taxes.The Company records a tax provision for the anticipated tax consequences of the reported results of operations. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those deferred tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company believes it is more likely than not that forecasted income, including income that may be generated as a result of certain tax planning strategies, together with the tax effects of the deferred tax liabilities, will be sufficient to fully recover the remaining net realizable value of its deferred tax assets. In the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. In addition, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on the Company’s financial condition and operating results. See Note 11 in the Condensed Notes to Consolidated Financial Statements for additional information on income taxes.

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Other Comprehensive Income

6 Months Ended

Mar. 30, 2013

Other Comprehensive Income [Abstract]

Other Comprehensive Income

9. Other Comprehensive Income

Other Comprehensive Income, a component of Shareholders’ Investment, consists of foreign currency translation adjustments, gains or losses on derivative instruments, and defined benefit pension plan adjustments.

Income tax expense or benefit allocated to each component of other comprehensive income (loss) for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

	March 30, 2013
	Three Fiscal Months Ended						Six Fiscal Months Ended
			Tax		Net of				Tax		Net of
	Pretax		(Expense)		Tax		Pretax		(Expense)		Tax
	Amount		or Benefit		Amount		Amount		or Benefit		Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	(3,584)	$	-	$	(3,584)	$	(3,383)	$	-	$	(3,383)
Derivative instruments:
Unrealized net gain		2,270		(835)		1,435		3,545		(1,306)		2,239
Net gain reclassified to earnings		(920)		339		(581)		(760)		280		(480)
Defined benefit pension plan:
Unrealized net (loss) gain		(174)		52		(122)		43		(13)		30
Net loss reclassified to earnings		132		(41)		91		260		(79)		181
Currency exchange rate change		180		-		180		46		-		46
Other comprehensive loss	$	(2,096)	$	(485)	$	(2,581)	$	(249)	$	(1,118)	$	(1,367)

	March 31, 2012
	Three Fiscal Months Ended						Six Fiscal Months Ended
			Tax		Net of				Tax		Net of
	Pretax		(Expense)		Tax		Pretax		(Expense)		Tax
	Amount		or Benefit		Amount		Amount		or Benefit		Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	772	$	-	$	772	$	(771)	$	-	$	(771)
Derivative instruments:
Unrealized net (loss) gain		(192)		72		(120)		198		(73)		125
Net (gain) loss reclassified to earnings		(90)		34		(56)		488		(181)		307
Defined benefit pension plan:
Unrealized net (loss) gain		(122)		53		(69)		130		(45)		85
Net loss reclassified to earnings		20		(6)		14		40		(12)		28
Currency exchange rate change		(54)		-		(54)		18		-		18
Other comprehensive income	$	334	$	153	$	487	$	103	$	(311)	$	(208)

The changes in the net-of-tax balances of each component of AOCI during the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 were as follows:

	March 30, 2013
	Three Fiscal Months Ended								Six Fiscal Months Ended
	Foreign		Unrealized		Defined				Foreign		Unrealized		Defined
	Currency		Gain on		Benefit				Currency		(Loss) Gain		Benefit
	Translation		Derivative		Pension Plan				Translation		on Derivative		Pension Plan
	Adjustments		Instruments		Adjustments		Total		Adjustments		Instruments		Adjustments		Total
	(expressed in thousands)
Beginning balance	$	16,935	$	497	$	(5,317)	$	12,115	$	16,734	$	(408)	$	(5,425)	$	10,901
Other comprehensive
loss before
reclassifications		(3,584)		1,435		58		(2,091)		(3,383)		2,239		76		(1,068)
Amounts reclassified
to earnings		-		(581)		91		(490)		-		(480)		181		(299)
Other comprehensive
loss		(3,584)		854		149		(2,581)		(3,383)		1,759		257		(1,367)
Ending balance	$	13,351	$	1,351	$	(5,168)	$	9,534	$	13,351	$	1,351	$	(5,168)	$	9,534

	March 31, 2012
	Three Fiscal Months Ended								Six Fiscal Months Ended
	Foreign		Unrealized		Defined				Foreign		Unrealized		Defined
	Currency		Loss on		Benefit				Currency		Loss on		Benefit
	Translation		Derivative		Pension Plan				Translation		Derivative		Pension Plan
	Adjustments		Instruments		Adjustments		Total		Adjustments		Instruments		Adjustments		Total
	(expressed in thousands)
Beginning balance	$	17,314	$	(8)	$	(1,712)	$	15,594	$	18,857	$	(616)	$	(1,952)	$	16,289
Other comprehensive
income (loss) before
reclassifications		772		(120)		(123)		529		(771)		125		103		(543)
Amounts reclassified
to earnings		-		(56)		14		(42)		-		307		28		335
Other comprehensive
income (loss)		772		(176)		(109)		487		(771)		432		131		(208)
Ending balance	$	18,086	$	(184)	$	(1,821)	$	16,081	$	18,086	$	(184)	$	(1,821)	$	16,081

The effect on certain line items in the Consolidated Statements of Income of amounts reclassified out of AOCI for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 was as follows:

			Three Fiscal Months Ended				Six Fiscal Months Ended			Affected Line Item in the
			March 30,		March 31,		March 30,		March 31,	Consolidated Statements
			2013		2012		2013		2012	of Income
Derivative instruments:	(expressed in thousands)
Currency exchange contracts		$	920	$	273	$	760	$	(129)	Revenue
Interest rate swaps			-		(183)		-		(359)	Interest expense, net
Total net gains (losses) included in
income before income taxes			920		90		760		(488)
Income tax (expense) benefit			(339)		(34)		(280)		181
Total net gains (losses) included in
net income			581		56		480		(307)
Defined benefit pension plan:
Actuarial losses			(44)		(7)		(85)		(13)	Cost of sales
Actuarial losses			(39)		(6)		(78)		(12)	Selling and marketing
Actuarial losses			(49)		(7)		(97)		(15)	General and administrative
Total losses included in income
before income taxes			(132)		(20)		(260)		(40)
Income tax expense			41		6		79		12
Total net losses included in net income			(91)		(14)		(181)		(28)
Total net-of-tax reclassifications out of
Accumulated other comprehensive
income included in net income		$	490	$	42	$	299	$	(335)

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Derivative Instruments and Hedging Activities

6 Months Ended

Mar. 30, 2013

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

7. Derivative Instruments and Hedging Activities

The Company’s results of operations could be materially impacted by changes in foreign currency exchange rates, as well as interest rates on its floating rate indebtedness. In an effort to manage exposure to these risks, the Company periodically enters into forward and option currency exchange contracts, interest rate swaps and forward interest rate swaps. Because the market value of these hedging contracts is derived from current market rates, they are classified as derivative financial instruments. The Company does not use derivatives for speculative or trading purposes. The derivative contracts contain credit risk to the extent that the Company’s bank counterparties may be unable to meet the terms of the agreements. The amount of such credit risk is generally limited to the unrealized gains, if any, in such contracts. Such risk is minimized by limiting those counterparties to major financial institutions of high credit quality. For derivative instruments executed under master netting arrangements, the Company has the contractual right to offset fair value amounts recognized for the right to reclaim cash collateral with obligations to return cash collateral. The Company does not offset fair value amounts recognized on these derivative instruments. As of March 30, 2013, the Company does not have any foreign exchange contracts with credit-risk related contingent features.

The Company’s currency exchange contracts and interest rate swaps are designated as cash flow hedges and qualify as hedging instruments pursuant to ASC 815. The Company also has derivatives which are accounted for and reported under the guidance of ASC 830-20-10. Regardless of the designation for accounting purposes, the Company believes that all of its derivative instruments are hedges of transactional risk exposures. The fair value of the Company’s outstanding designated and undesignated derivative assets and liabilities are reported in the March 30, 2013 and September 29, 2012 Consolidated Balance Sheet as follows:

	March 30, 2013
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	2,002	$	116
Total designated hedge derivatives		2,002		116
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		53
Total hedge and other derivatives	$	2,002	$	169

	September 29, 2012
		Prepaid Expenses
		and Other		Other Accrued
		Current Assets		Liabilities
Designated hedge derivatives:		(expressed in thousands)
Foreign exchange cash flow hedges	$	432	$	1,157
Total designated hedge derivatives		432		1,157
Derivatives not designated as hedges:
Foreign exchange balance sheet derivatives		-		415
Total hedge and other derivatives	$	432	$	1,572

Cash Flow Hedging – Currency Risks

Currency exchange contracts utilized to maintain the functional currency value of expected financial transactions denominated in foreign currencies are designated as cash flow hedges. Qualifying gains and losses related to changes in the market value of these contracts are reported as a component of Accumulated Other Comprehensive Income (“AOCI”) within Shareholders’ Investment on the Consolidated Balance Sheets and reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The effective portion of the cash flow hedges represents the change in fair value of the hedge that offsets the change in the functional currency value of the hedged item. Each month, the Company assesses whether its currency exchange contracts are effective and, when a contract is determined to be no longer effective as a hedge, the Company discontinues hedge accounting prospectively. Subsequent changes in the market value of ineffective currency exchange contracts are recognized as an increase or decrease in Revenue on the Consolidated Statement of Income, because that is the same line item upon which the underlying hedged transaction is reported.

At March 30, 2013 and March 31, 2012, the Company had outstanding cash flow hedge currency exchange contracts with gross notional U.S. dollar equivalent amounts of $46.2 million and $37.0 million, respectively. Upon netting offsetting contracts to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding were $42.8 million and $34.9 million at March 30, 2013 and March 31, 2012, respectively. At March 30, 2013 the net market value of the foreign currency exchange contracts was a net asset of $1.9 million, consisting of $2.0 million in assets and $0.1 million in liabilities. At March 31, 2012 the net market value of the foreign currency exchange contracts was a net liability of $0.1 million, consisting of $0.3 million in assets and $0.4 million in liabilities.

The pretax amounts recognized in AOCI on currency exchange contracts for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012, including gains and losses reclassified into earnings in the Consolidated Statements of Income and gains (losses) recognized in other comprehensive income (“OCI”), are as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Beginning unrealized net gain (loss) in AOCI	$	787	$	414	$	(648)	$	(365)
Net (gain) loss reclassified into Revenue (effective portion)		(920)		(273)		(760)		129
Net gain (loss) recognized in OCI (effective portion)		2,271		(153)		3,546		224
Ending unrealized net gain (loss) in AOCI	$	2,138	$	(12)	$	2,138	$	(12)

The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was $0.1 million in each of the three and six-fiscal month periods ended March 30, 2013. The amount recognized in earnings as a result of the ineffectiveness of cash flow hedges was less than $0.1 million in each of the three and six-fiscal month periods ended March 31, 2012. At March 30, 2013 and March 31, 2012, the amount projected to be reclassified from AOCI into earnings in the next 12 months was a net gain of $2.1 million and a net loss of $0.1 million, respectively. The maximum remaining maturity of any forward or optional contract at March 30, 2013 and March 31, 2012 was 1.3 years and 2.3 years, respectively.

Cash Flow Hedging - Interest Rate Risks

During the three and six-fiscal month periods ended March 31, 2012, the Company used floating to fixed interest rate swaps to mitigate its exposure to future changes in interest rates related to its floating rate indebtedness. The Company had designated these interest rate swap arrangements as cash flow hedges. As a result, changes in the fair value of the interest rate swaps were recorded in AOCI within Shareholders’ Investment on the Consolidated Balance Sheets throughout the entire contractual term of each of the interest rate swap arrangements. During the fiscal year ended September 29, 2012, the Company’s interest rate swap arrangements expired at various times from July 25, 2012 through September 28, 2012.

At March 31, 2012, the Company had outstanding interest rate swaps with total notional amounts of $40.0 million. During the six fiscal month period ended March 31, 2012, the Company paid fixed interest in exchange for interest received at monthly U.S. LIBOR. At March 31, 2012, the weighted-average interest rate payable by the Company under the terms of the credit facility borrowings and outstanding interest rate swaps was 2.09%. At March 31, 2012, there was a 45 basis-point differential between the variable rate interest paid by the Company on its outstanding credit facility borrowings and the variable rate interest received on the interest rate swaps. As a result of this differential, the overall effective interest rate applicable to outstanding credit facility borrowings, under the terms of the credit facility and interest rate swap agreements, was 2.54%.

The total market value of interest rate swaps at March 31, 2012 was a liability of $0.3million. The pretax amounts recognized in AOCI on interest rate swaps for the three and six-fiscal month periods ended March 31, 2012 was as follows:

	Three Fiscal		Six Fiscal
	Months Ended		Months Ended
		March 31,		March 31,
		2012		2012
	(expressed in thousands)
Beginning unrealized net loss in AOCI	$	(427)	$	(617)
Net loss reclassified into Interest expense (effective portion)		183		359
Net loss recognized in OCI (effective portion)		(38)		(24)
Ending unrealized net loss in AOCI	$	(282)	$	(282)

Foreign Currency Balance Sheet Derivatives

The Company also uses foreign currency derivative contracts to maintain the functional currency value of monetary assets and liabilities denominated in non-functional foreign currencies. The gains and losses related to the changes in the market value of these derivative contracts are included in Other Income (Expense), net on the Consolidated Statement of Income.

At March 30, 2013 and March 31, 2012, the Company had outstanding foreign currency balance sheet derivative contracts with gross notional U.S. dollar equivalent amounts of $35.9 million and $38.1 million, respectively. Upon netting offsetting contracts by counterparty banks to sell foreign currencies against contracts to purchase foreign currencies, irrespective of contract maturity dates, the net notional U.S. dollar equivalent amount of contracts outstanding at March 30, 2013 and March 31, 2012 was $11.3 million and $11.8 million, respectively. At March 30, 2013, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of less than $0.1 million. At March 31, 2012, the net market value of the foreign exchange balance sheet derivative contracts was a net liability of less than $0.1 million.

The net losses and gains recognized in the Consolidated Statements of Income on foreign exchange balance sheet derivative contracts for the three and six-fiscal month periods ended March 30, 2013 and March 31, 2012 are as follows:

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Net (loss) gain recognized in Other expense, net	$	(218)	$	205	$	(272)	$	199

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Fair Value Measurements

6 Months Ended

Mar. 30, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

8. Fair Value Measurements

In determining the fair value of financial assets and liabilities, the Company currently utilizes market data or other assumptions that it believes market participants would use in pricing the asset or liability in the principal or most advantageous market, and adjusts for non-performance and/or other risk associated with the Company as well as counterparties, as appropriate. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1 Inputs: Unadjusted quoted prices which are available in active markets for identical assets or liabilities accessible to the Company at the measurement date.

Level 2 Inputs: Inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The hierarchy gives the highest priority to Level 1, because this level provides the most reliable measure of fair value, while giving the lowest priority to Level 3.

Financial Instruments Measured at Fair Value on a Recurring Basis

As of March 30, 2013 and September 29, 2012, financial assets and liabilities subject to fair value measurements on a recurring basis were as follows:

	March 30, 2013
		Level 1		Level 2		Level 3		Total
Assets:	(expressed in thousands)
Currency contracts(1)	$	-	$	2,002	$	-	$	2,002
Total assets	$	-	$	2,002	$	-	$	2,002
Liabilities:
Currency contracts(1)	$	-	$	169	$	-	$	169
Total liabilities	$	-	$	169	$	-	$	169

	September 29, 2012
		Level 1		Level 2		Level 3		Total
Assets:	(expressed in thousands)
Currency contracts(1)	$	-	$	432	$	-	$	432
Total assets	$	-	$	432	$	-	$	432
Liabilities:
Currency contracts(1)	$	-	$	1,572	$	-	$	1,572
Total liabilities	$	-	$	1,572	$	-	$	1,572

(1) Based on observable market transactions of spot currency rates and forward currency rates on equivalently-termed instruments.

Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis

The Company’s goodwill, intangible assets and other long-lived assets are nonfinancial assets that were acquired either as part of a business combination, individually or with a group of other assets. These nonfinancial assets were initially, and are currently, measured and recognized at amounts equal to the fair value determined as of the date of acquisition. Periodically, these nonfinancial assets are tested for impairment, by comparing their respective carrying values to the estimated fair value of the reporting unit or asset group in which they reside. In the event any of these nonfinancial assets were to become impaired, the Company would recognize an impairment loss equal to the amount by which the carrying value of the reporting unit, impaired asset or asset group exceeds its estimated fair value. Fair value measurements of reporting units are estimated using an income approach involving discounted or undiscounted cash flow models that contain certain Level 3 inputs requiring management judgment, including projections of economic conditions and customer demand, revenue and margins, changes in competition, operating costs, working capital requirements, and new product introductions. Fair value measurements of the reporting units associated with the Company’s goodwill balances are estimated at least annually in the fourth quarter of each fiscal year for purposes of impairment testing. Fair value measurements associated with the Company’s intangible assets and other long-lived assets are estimated when events or changes in circumstances such as market value, asset utilization, physical change, legal factors, or other matters indicate that the carrying value may not be recoverable.

Financial Instruments not Measured at Fair Value

Certain of the Company’s financial instruments are not measured at fair value but nevertheless are recorded at carrying amounts approximating fair value, based on their short-term nature or variable interest rate. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings.

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Financing

6 Months Ended

Mar. 30, 2013

Financing [Abstract]

Financing

10. Financing

Short-term borrowings at March 30, 2013 and September 29, 2012 consist of the following:

		March 30,		September 29,
		2013		2012
	(expressed in thousands)
Bank line of credit, swing line loan (3.25% rate in effect at
March 30, 2013), maturing September 2017	$	5,000	$	-
Notes payable, non-interest bearing		-		230
Total short-term borrowings	$	5,000	$	230

The Company’s credit facility provides for up to $100 million for working capital financing, acquisitions, share purchases, or other general corporate purposes and expires in September 2017.  At March 30, 2013 outstanding borrowings under the credit facility were $5.0 million. At March 30, 2013, under the terms of the credit facility borrowings, the fixed interest rate applicable to outstanding credit facility borrowings was 3.25%. At September 29, 2012,  the Company had no borrowings outstanding under the $100 million credit facility. Short-term borrowings at September 29, 2012 consisted of non-interest bearing notes payable to vendors by the Company’s Japanese Sensors’ subsidiary. At March 30, 2013, the Company had outstanding letters of credit drawn from the credit facility totaling $10.7 million, leaving $84.3 million of unused borrowing capacity. At September 29, 2012, the Company had outstanding letters of credit drawn from the credit facility totaling $10.1 million, leaving $89.9 million of unused borrowing capacity.

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Stock Purchases (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended	6 Months Ended
	Sep. 29, 2012	Mar. 30, 2013
Stock Purchases [Abstract]
Initial payment	$ 35.0
Number of shares purchased	500,000
Fair value of common stock purchased	28.0
Reduction in common stock value	0.1
Reduction in additional paid-in capital	26.1
Reduction in retained earnings	1.8
Remaining initial payment recorded as reduction in retained earnings	$ 7.0
Maximum amount of shares of common stock the Company can be required to issue to settle the agreement		2,000,000
Required delivery of common stock, shares		139,000
"VWAP" price increase/ decrease		$ 1.00
"VWAP" price increase/ decrease share fluctuation		12,000

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Capital Assets (Tables)

6 Months Ended

Mar. 30, 2013

Capital Assets [Abstract]

Property And Equipment

		March 30,		September 29,
		2013		2012
	(expressed in thousands)
Land and improvements	$	1,710	$	1,711
Buildings and improvements		53,574		53,545
Machinery and equipment		130,934		118,838
Total		186,218		174,094
Less accumulated depreciation		(116,912)		(112,441)
Property and equipment, net	$	69,306	$	61,653

Other Intangible Assets

	March 30, 2013
							Weighted
							Average
		Gross Carrying		Accumulated		Net Carrying	Useful Life
		Amount		Amortization		Value	(in Years)
	(dollar amounts expressed in thousands)
Software development costs	$	15,860	$	(7,504)	$	8,356	5.7
Patents		10,126		(3,248)		6,878	15.3
Trademarks and trade names		6,050		(1,128)		4,922	30.2
Land-use rights		1,247		(111)		1,136	47.8
Total	$	33,283	$	(11,991)	$	21,292	14.3

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Other Comprehensive Income (Tables)

6 Months Ended

Mar. 30, 2013

Other Comprehensive Income [Abstract]

Schedule Of Other Comprehensive Income (Loss)

	March 30, 2013
	Three Fiscal Months Ended						Six Fiscal Months Ended
			Tax		Net of				Tax		Net of
	Pretax		(Expense)		Tax		Pretax		(Expense)		Tax
	Amount		or Benefit		Amount		Amount		or Benefit		Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	(3,584)	$	-	$	(3,584)	$	(3,383)	$	-	$	(3,383)
Derivative instruments:
Unrealized net gain		2,270		(835)		1,435		3,545		(1,306)		2,239
Net gain reclassified to earnings		(920)		339		(581)		(760)		280		(480)
Defined benefit pension plan:
Unrealized net (loss) gain		(174)		52		(122)		43		(13)		30
Net loss reclassified to earnings		132		(41)		91		260		(79)		181
Currency exchange rate change		180		-		180		46		-		46
Other comprehensive loss	$	(2,096)	$	(485)	$	(2,581)	$	(249)	$	(1,118)	$	(1,367)

	March 31, 2012
	Three Fiscal Months Ended						Six Fiscal Months Ended
			Tax		Net of				Tax		Net of
	Pretax		(Expense)		Tax		Pretax		(Expense)		Tax
	Amount		or Benefit		Amount		Amount		or Benefit		Amount
	(expressed in thousands)
Foreign currency translation adjustments	$	772	$	-	$	772	$	(771)	$	-	$	(771)
Derivative instruments:
Unrealized net (loss) gain		(192)		72		(120)		198		(73)		125
Net (gain) loss reclassified to earnings		(90)		34		(56)		488		(181)		307
Defined benefit pension plan:
Unrealized net (loss) gain		(122)		53		(69)		130		(45)		85
Net loss reclassified to earnings		20		(6)		14		40		(12)		28
Currency exchange rate change		(54)		-		(54)		18		-		18
Other comprehensive income	$	334	$	153	$	487	$	103	$	(311)	$	(208)

Schedule Of Changes In Each Component Of Accumulated Other Comprehensive Income

	March 30, 2013
	Three Fiscal Months Ended								Six Fiscal Months Ended
	Foreign		Unrealized		Defined				Foreign		Unrealized		Defined
	Currency		Gain on		Benefit				Currency		(Loss) Gain		Benefit
	Translation		Derivative		Pension Plan				Translation		on Derivative		Pension Plan
	Adjustments		Instruments		Adjustments		Total		Adjustments		Instruments		Adjustments		Total
	(expressed in thousands)
Beginning balance	$	16,935	$	497	$	(5,317)	$	12,115	$	16,734	$	(408)	$	(5,425)	$	10,901
Other comprehensive
loss before
reclassifications		(3,584)		1,435		58		(2,091)		(3,383)		2,239		76		(1,068)
Amounts reclassified
to earnings		-		(581)		91		(490)		-		(480)		181		(299)
Other comprehensive
loss		(3,584)		854		149		(2,581)		(3,383)		1,759		257		(1,367)
Ending balance	$	13,351	$	1,351	$	(5,168)	$	9,534	$	13,351	$	1,351	$	(5,168)	$	9,534

	March 31, 2012
	Three Fiscal Months Ended								Six Fiscal Months Ended
	Foreign		Unrealized		Defined				Foreign		Unrealized		Defined
	Currency		Loss on		Benefit				Currency		Loss on		Benefit
	Translation		Derivative		Pension Plan				Translation		Derivative		Pension Plan
	Adjustments		Instruments		Adjustments		Total		Adjustments		Instruments		Adjustments		Total
	(expressed in thousands)
Beginning balance	$	17,314	$	(8)	$	(1,712)	$	15,594	$	18,857	$	(616)	$	(1,952)	$	16,289
Other comprehensive
income (loss) before
reclassifications		772		(120)		(123)		529		(771)		125		103		(543)
Amounts reclassified
to earnings		-		(56)		14		(42)		-		307		28		335
Other comprehensive
income (loss)		772		(176)		(109)		487		(771)		432		131		(208)
Ending balance	$	18,086	$	(184)	$	(1,821)	$	16,081	$	18,086	$	(184)	$	(1,821)	$	16,081

Schedule Of Amounts Reclassified Out Of Accumulated Other Comprehensive Income

			Three Fiscal Months Ended				Six Fiscal Months Ended			Affected Line Item in the
			March 30,		March 31,		March 30,		March 31,	Consolidated Statements
			2013		2012		2013		2012	of Income
Derivative instruments:	(expressed in thousands)
Currency exchange contracts		$	920	$	273	$	760	$	(129)	Revenue
Interest rate swaps			-		(183)		-		(359)	Interest expense, net
Total net gains (losses) included in
income before income taxes			920		90		760		(488)
Income tax (expense) benefit			(339)		(34)		(280)		181
Total net gains (losses) included in
net income			581		56		480		(307)
Defined benefit pension plan:
Actuarial losses			(44)		(7)		(85)		(13)	Cost of sales
Actuarial losses			(39)		(6)		(78)		(12)	Selling and marketing
Actuarial losses			(49)		(7)		(97)		(15)	General and administrative
Total losses included in income
before income taxes			(132)		(20)		(260)		(40)
Income tax expense			41		6		79		12
Total net losses included in net income			(91)		(14)		(181)		(28)
Total net-of-tax reclassifications out of
Accumulated other comprehensive
income included in net income		$	490	$	42	$	299	$	(335)

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Retirement Benefit Plan (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Retirement Benefit Plan [Abstract]
Service cost	$ 174	$ 104	$ 344	$ 211
Interest cost	194	211	384	427
Expected return on plan assets	(175)	(167)	(345)	(338)
Net amortization and deferral	132	20	260	40
Net periodic benefit cost	$ 325	$ 168	$ 643	$ 340
Expected rate of return on plan assets	5.20%			5.40%

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Derivative Instruments and Hedging Activities (Net Gains (Losses) Recognized in Income for Derivative Contracts) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Derivative Instruments and Hedging Activities [Abstract]
Net loss recognized in Other income (expense), net	$ (218)	$ 205	$ (272)	$ 199

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Consolidated Statements of Comprehensive Income (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 30, 2013	Mar. 31, 2012	Mar. 30, 2013	Mar. 31, 2012
Consolidated Statements of Comprehensive Income (unaudited) [Abstract]
Net income	$ 11,061	$ 11,157	$ 24,844	$ 26,696
Other comprehensive (loss) income, net of tax:
Foreign currency translation	(3,584)	772	(3,383)	(771)
Derivative instruments:
Unrealized net gain (loss)	1,435	(120)	2,239	125
Net (gain) loss reclassified to earnings	(581)	(56)	(480)	307
Defined benefit pension plan:
Unrealized net (loss) gain	(122)	(69)	30	85
Net loss reclassified to earnings	91	14	181	28
Currency exchange rate change	180	(54)	46	18
Other comprehensive (loss) income	(2,581)	487	(1,367)	(208)
Comprehensive income	$ 8,480	$ 11,644	$ 23,477	$ 26,488

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Stock Purchases

6 Months Ended

Mar. 30, 2013

Stock Purchases [Abstract]

Stock Purchases

4. Stock Purchases

During the fourth quarter of fiscal year 2012, the Company entered into an accelerated share purchase agreement with an unrelated third party investment bank. This forward contract is indexed to, and potentially settled in, the Company’s common stock. This forward contract meets the requirements of ASC 815-40 to be classified as permanent equity. In connection with the agreement, the Company made an initial $35.0 million payment to the investment bank and immediately received an initial delivery of approximately 0.5 million shares of its common stock with a fair value of $28.0 million as of the purchase date. Effective as of the date of the initial 0.5 million stock purchase, the transaction was accounted for as a share retirement, resulting in a reduction of common stock, additional paid-in capital and retained earnings of $0.1 million, $26.1 million and $1.8 million, respectively. The remaining $7.0 million of the Company’s initial payment to the investment bank was reported as a reduction in retained earnings. As long as the forward contract continues to meet the requirements to be classified as permanent equity, the Company will not record future changes in its fair value. The contract continued to meet those requirements as of March 30, 2013 and the Company expects it will continue to meet those requirements through the settlement date. The agreement expires in the third quarter of fiscal year 2013.  Upon settlement of the contract, the Company will adjust common stock, as well as either additional paid-in capital or retained earnings, as appropriate, to reflect the final settlement amount.

The specific number of shares that the Company will ultimately purchase under the accelerated share purchase agreement will be based on the volume weighted average price (“VWAP”) of the Company’s common stock during the purchase period, less an agreed upon discount, unless such discounted VWAP were to fall below a specified floor price, in which case the floor price would be in effect. The maximum number of shares of common stock the Company can be required to issue to settle the agreement cannot exceed 2.0 million. At March 30, 2013, if the accelerated share purchase agreement had been settled on that date, the investment bank would have been required to deliver approximately 139,000 additional shares of the Company’s common stock. For every $1.00 increase or decrease in the Company’s VWAP, the settlement amount changes by approximately 12,000 shares.

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Financing (Tables)

6 Months Ended

Mar. 30, 2013

Financing [Abstract]

Schedule Of Short-term Borrowings

		March 30,		September 29,
		2013		2012
	(expressed in thousands)
Bank line of credit, swing line loan (3.25% rate in effect at
March 30, 2013), maturing September 2017	$	5,000	$	-
Notes payable, non-interest bearing		-		230
Total short-term borrowings	$	5,000	$	230

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Derivative Instruments and Hedging Activities (Fair Value Of Outstanding Designated And Undesignated Derivative Assets And Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Mar. 30, 2013	Sep. 29, 2012
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 2,002	$ 432
Derivative liability, fair value	169	1,572
Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	2,002	432
Derivative liability, fair value	116	1,157
Designated as Hedging Instrument [Member] | Currency exchange contracts [Member]
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	2,002	432
Derivative liability, fair value	116	1,157
Not Designated as Hedging Instrument [Member] | Foreign Exchange Balance Sheet Derivative Contracts [Member]
Derivatives, Fair Value [Line Items]
Derivative liability, fair value	$ 53	$ 415

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Basis of Presentation (Tables)

6 Months Ended

Mar. 30, 2013

Basis of Presentation [Abstract]

Inventories

	March 30,		September 29,
	2013		2012
		(expressed in thousands)
Customer projects in various stages of completion	$	15,530	$	17,704
Components, assemblies and parts		59,280		50,275
Total	$	74,810	$	67,979

Warranty Obligations

	Three Fiscal Months Ended				Six Fiscal Months Ended
		March 30,		March 31,		March 30,		March 31,
		2013		2012		2013		2012
	(expressed in thousands)
Beginning balance	$	4,423	$	4,595	$	3,984	$	5,290
Warranty provisions		1,454		1,094		3,146		1,483
Warranty claims		(1,544)		(1,565)		(2,826)		(2,583)
Adjustments to preexisting warranties		151		300		151		300
Currency translation		(46)		44		(17)		(22)
Ending balance	$	4,438	$	4,468	$	4,438	$	4,468