Table of Contents





United States
SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549



---

FORM 10-Q



---

|  |                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------
|x | Quarterly Report Pursuant
 to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the
 Quarterly period ended June 27, 2009       
|  |                                                                                                                                               
|  | 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: (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).

|  |     |  |   |   
|- | --- |  | - | --
|o | 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
in Rule 12b-2 of the Exchange Act. (Check one):

|                          |                     |                         |                            
|------------------------- | ------------------- | ----------------------- | ---------------------------
|Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | 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 the Registrants common stock as of July 31, 2009 was 16,681,623shares.





---



MTS SYSTEMS CORPORATION

REPORT ON FORM 10-Q 
FOR THE THREE AND NINE MONTHS ENDED JUNE 27, 2009

INDEX

|                               |         |                                                                                                        |         
|------------------------------ | ------- | ------------------------------------------------------------------------------------------------------ | --------
|                               |         |                                                                                                        | Page No.
|                               |         |                                                                                                        |         
|PART I - FINANCIAL INFORMATION |        
|                               |        
|                               | Item 1. | Financial
 Statements (unaudited)                                                                      |         
|                               |         |                                                                                                        |         
|                               |         | Consolidated Balance Sheets as of
 June 27, 2009 and September 27, 2008                                | 2       
|                               |         |                                                                                                        |         
|                               |         | Consolidated Statements of Income for the
 Three and Nine Months Ended June 27, 2009 and June 28, 2008 | 3       
|                               |         |                                                                                                        |         
|                               |         | Consolidated Statements of Cash Flows for the
 Nine Months Ended June 27, 2009 and June 28, 2008       | 4       
|                               |         |                                                                                                        |         
|                               |         | Condensed Notes to Consolidated Financial
Statements                                                   | 5
 - 18 
|                               |         |                                                                                                        |         
|                               | Item 2. | Managements
 Discussion and Analysis of Financial
 Condition and Results of Operations                | 19
 - 37
|                               |         |                                                                                                        |         
|                               | Item 3. | Quantitative
 and Qualitative Disclosures About
 Market Risk                                           | 37      
|                               |         |                                                                                                        |         
|                               | Item 4. | Controls
 and Procedures                                                                               | 38      
|                               |         |                                                                                                        |         
|PART II  OTHER INFORMATION    |        
|                               |        
|                               | Item 2. | Unregistered
 Sales of Equity Securities and Use of Proceeds                                           | 38      
|                               |         |                                                                                                        |         
|                               | Item 6. | Exhibits                                                                                               | 39      
|                               |         |                                                                                                        |         
|SIGNATURES                     | 39     

1

---



Table of Contents

PART 1  FINANCIAL INFORMATIONItem 1. Financial Statements

MTS SYSTEMS CORPORATIONConsolidated Balance Sheets
(unaudited - in thousands, except per share data)

|                                                                                                |  |                |         |                     |   |         | 
|----------------------------------------------------------------------------------------------- |  | -------------- | ------- | ------------------- | - | ------- | 
|                                                                                                |  | June 27,
 2009 |         | September 27,
 2008 |  
|ASSETS                                                                                          |  |                |         |                     |   |         | 
|                                                                                                |  |                |         |                     |   |         | 
|Current Assets:                                                                                 |  |                |         |                     |   |         | 
|Cash and cash equivalents                                                                       |  | $              | 118,942 |                     | $ | 114,099 | 
|Accounts receivable, net of allowances for doubtful accounts of $1,243
 and $1,008 respectively |  |                | 77,125  |                     |   | 101,331 | 
|Unbilled accounts receivable                                                                    |  |                | 29,341  |                     |   | 43,022  | 
|Inventories                                                                                     |  |                | 49,764  |                     |   | 46,135  | 
|Prepaid expenses and other current assets                                                       |  |                | 3,110   |                     |   | 6,205   | 
|Deferred tax assets                                                                             |  |                | 12,749  |                     |   | 11,825  | 
|Assets of discontinued operations                                                               |  |                | 270     |                     |   | 380     | 
|Total current assets                                                                            |  |                | 291,301 |                     |   | 322,997 | 
|                                                                                                |  |                |         |                     |   |         | 
|Property and equipment, net                                                                     |  |                | 57,258  |                     |   | 50,534  | 
|Goodwill                                                                                        |  |                | 16,135  |                     |   | 1,668   | 
|Other intangible assets, net                                                                    |  |                | 22,131  |                     |   | 4,363   | 
|Other assets                                                                                    |  |                | 3,970   |                     |   | 17,283  | 
|Deferred tax assets                                                                             |  |                | 2,116   |                     |   | 2,312   | 
|Total Assets                                                                                    |  | $              | 392,911 |                     | $ | 399,157 | 
|                                                                                                |  |                |         |                     |   |         | 
|LIABILITIES AND SHAREHOLDERS INVESTMENT                                                        |  |                |         |                     |   |         | 
|                                                                                                |  |                |         |                     |   |         | 
|Current Liabilities:                                                                            |  |                |         |                     |   |         | 
|Short-term borrowings                                                                           |  | $              | 40,199  |                     | $ | 24,338  | 
|Current maturities of long-term debt                                                            |  |                | 1,154   |                     |   | 2,308   | 
|Accounts payable                                                                                |  |                | 16,843  |                     |   | 28,567  | 
|Accrued payroll and related costs                                                               |  |                | 22,574  |                     |   | 33,819  | 
|Advance payments from customers                                                                 |  |                | 50,772  |                     |   | 64,979  | 
|Accrued warranty costs                                                                          |  |                | 7,883   |                     |   | 6,107   | 
|Accrued income taxes                                                                            |  |                | 1,317   |                     |   | 4,510   | 
|Deferred tax liabilities                                                                        |  |                | 3,537   |                     |   | 3,723   | 
|Other accrued liabilities                                                                       |  |                | 28,928  |                     |   | 17,042  | 
|Liabilities of discontinued operations                                                          |  |                | 174     |                     |   | 177     | 
|Total current liabilities                                                                       |  |                | 173,381 |                     |   | 185,570 | 
|                                                                                                |  |                |         |                     |   |         | 
|Deferred tax liabilities                                                                        |  |                | 2,592   |                     |   | 1,354   | 
|Non-current accrued income taxes                                                                |  |                | 4,433   |                     |   | 4,009   | 
|Pension benefit plan                                                                            |  |                | 737     |                     |   | 245     | 
|Other long-term liabilities                                                                     |  |                | 3,245   |                     |   | 3,037   | 
|Total Liabilities                                                                               |  |                | 184,388 |                     |   | 194,215 | 
|                                                                                                |  |                |         |                     |   |         | 
|Shareholders Investment:                                                                       |  |                |         |                     |   |         | 
|Common stock, $.25 par; 64,000 shares authorized:                                               |  |                |         |                     |   |         | 
|16,672 and 16,976 shares issued and outstanding                                                 |  |                | 4,168   |                     |   | 4,244   | 
|Retained earnings                                                                               |  |                | 182,655 |                     |   | 175,216 | 
|Accumulated other comprehensive income                                                          |  |                | 21,700  |                     |   | 25,482  | 
|Total Shareholders Investment                                                                  |  |                | 208,523 |                     |   | 204,942 | 
|Total Liabilities and Shareholders Investment                                                  |  | $              | 392,911 |                     | $ | 399,157 | 

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

2

---



Table of Contents

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

|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|-------------------------------------------------------------- |  | ------------------ | ------ | ----------------- | - | -------------- | - | -------------- | ------- | - | - | ------- | -
|                                                               |  | Three Months Ended |        | Nine Months Ended |  
|                                                               |  | June 27,
 2009     |        | June 28,
 2008    |   | June 27,
 2009 |   | June 28,
 2008 |        
|Revenue:                                                       |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Product                                                        |  | $                  | 77,867 |                   | $ | 100,811        |   | $              | 271,537 |   | $ | 288,559 |  
|Service                                                        |  |                    | 12,912 |                   |   | 16,075         |   |                | 43,503  |   |   | 47,887  |  
|Total revenue                                                  |  |                    | 90,779 |                   |   | 116,886        |   |                | 315,040 |   |   | 336,446 |  
|Cost of sales:                                                 |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Product                                                        |  |                    | 49,484 |                   |   | 61,448         |   |                | 170,643 |   |   | 174,377 |  
|Service                                                        |  |                    | 6,691  |                   |   | 8,192          |   |                | 24,059  |   |   | 25,527  |  
|Total cost of sales                                            |  |                    | 56,175 |                   |   | 69,640         |   |                | 194,702 |   |   | 199,904 |  
|Gross profit                                                   |  |                    | 34,604 |                   |   | 47,246         |   |                | 120,338 |   |   | 136,542 |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Operating expenses:                                            |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Selling and marketing                                          |  |                    | 16,542 |                   |   | 19,286         |   |                | 53,531  |   |   | 58,044  |  
|General and administrative                                     |  |                    | 9,055  |                   |   | 9,013          |   |                | 26,981  |   |   | 25,587  |  
|Research and development                                       |  |                    | 4,199  |                   |   | 4,148          |   |                | 11,332  |   |   | 12,176  |  
|Total operating expenses                                       |  |                    | 29,796 |                   |   | 32,447         |   |                | 91,844  |   |   | 95,807  |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Income from operations                                         |  |                    | 4,808  |                   |   | 14,799         |   |                | 28,494  |   |   | 40,735  |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Interest expense                                               |  |                    | (548   | )                 |   | (150           | ) |                | (1,611  | ) |   | (818    | )
|Interest income                                                |  |                    | 101    |                   |   | 1,094          |   |                | 921     |   |   | 2,979   |  
|Other income (expense), net                                    |  |                    | 134    |                   |   | (416           | ) |                | (133    | ) |   | 416     |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Income before income taxes and discontinued operations         |  |                    | 4,495  |                   |   | 15,327         |   |                | 27,671  |   |   | 43,312  |  
|Provision for income taxes                                     |  |                    | 1,346  |                   |   | 4,342          |   |                | 7,323   |   |   | 10,701  |  
|Income before discontinued operations                          |  |                    | 3,149  |                   |   | 10,985         |   |                | 20,348  |   |   | 32,611  |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Discontinued operations:                                       |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|(Loss) income from discontinued operations, net of tax         |  |                    |       |                   |   | (686           | ) |                | 25      |   |   | (417    | )
|Net gain on disposal of discontinued businesses, net of tax    |  |                    |       |                   |   | 2,451          |   |                |        |   |   | 2,451   |  
|Income from discontinued operations, net of tax                |  |                    |       |                   |   | 1,765          |   |                | 25      |   |   | 2,034   |  
|Net income                                                     |  | $                  | 3,149  |                   | $ | 12,750         |   | $              | 20,373  |   | $ | 34,645  |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Earnings per share:                                            |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Basic-                                                         |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Income before discontinued operations                          |  | $                  | 0.19   |                   | $ | 0.64           |   | $              | 1.21    |   | $ | 1.86    |  
|Discontinued operations:                                       |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Loss from discontinued operations, net of tax                  |  |                    |       |                   |   | (0.04          | ) |                |        |   |   | (0.02   | )
|Net gain on disposal of discontinued businesses, net of
tax    |  |                    |       |                   |   | 0.14           |   |                |        |   |   | 0.14    |  
|Income from discontinued operations, net of tax                |  |                    |       |                   |   | 0.10           |   |                |        |   |   | 0.12    |  
|Earnings per share                                             |  | $                  | 0.19   |                   | $ | 0.74           |   | $              | 1.21    |   | $ | 1.98    |  
|Weighted average number of common shares outstanding -
basic   |  |                    | 16,741 |                   |   | 17,150         |   |                | 16,839  |   |   | 17,484  |  
|                                                               |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Diluted-                                                       |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Income before discontinued operations                          |  | $                  | 0.19   |                   | $ | 0.64           |   | $              | 1.21    |   | $ | 1.84    |  
|Discontinued operations:                                       |  |                    |        |                   |   |                |   |                |         |   |   |         |  
|Loss from discontinued operations, net of tax                  |  |                    |       |                   |   | (0.04          | ) |                |        |   |   | (0.02   | )
|Net gain on disposal of discontinued businesses, net of
tax    |  |                    |       |                   |   | 0.14           |   |                |        |   |   | 0.14    |  
|Income from discontinued operations, net of tax                |  |                    |       |                   |   | 0.10           |   |                |        |   |   | 0.12    |  
|Earnings per share                                             |  | $                  | 0.19   |                   | $ | 0.74           |   | $              | 1.21    |   | $ | 1.96    |  
|Weighted average number of common shares outstanding -
diluted |  |                    | 16,765 |                   |   | 17,324         |   |                | 16,878  |   |   | 17,683  |  

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

3

---



Table of Contents

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

|                                                                                       |  |                   |         |                |   |         |  
|-------------------------------------------------------------------------------------- |  | ----------------- | ------- | -------------- | - | ------- | -
|                                                                                       |  | Nine Months Ended |        
|                                                                                       |  | June 27,
 2009    |         | June 28,
 2008 |  
|Cash flows from operating activities:                                                  |  |                   |         |                |   |         |  
|Net income                                                                             |  | $                 | 20,373  |                | $ | 34,645  |  
|Adjustments to reconcile net income to net
 cash provided by operating activities:     |  |                   |         |                |   |         |  
|(Income) loss from discontinued operations                                             |  |                   | (25     | )              |   | 417     |  
|Net gain on disposal of discontinued
 operations                                       |  |                   |        |                |   | (2,451  | )
|Stock-based compensation                                                               |  |                   | 2,864   |                |   | 3,253   |  
|Excess tax benefits from stock-based
 compensation                                     |  |                   | (4      | )              |   | (691    | )
|Charge for fair value mark-up of acquired
 inventory                                   |  |                   | 1,720   |                |   |        |  
|Net periodic pension benefit cost                                                      |  |                   | 351     |                |   | 996     |  
|Depreciation and amortization                                                          |  |                   | 8,924   |                |   | 6,723   |  
|Deferred income taxes                                                                  |  |                   | 483     |                |   | (2,931  | )
|Bad debt provision                                                                     |  |                   | 456     |                |   | (169    | )
|                                                                                       |  |                   |         |                |   |         |  
|Changes in operating assets and
 liabilities, excluding the effect of the acquisition: |  |                   |         |                |   |         |  
|Accounts and unbilled contracts receivable                                             |  |                   | 45,926  |                |   | (7,202  | )
|Inventories                                                                            |  |                   | 2,544   |                |   | (3,357  | )
|Prepaid expenses                                                                       |  |                   | 164     |                |   | (966    | )
|Other assets                                                                           |  |                   | (1,665  | )              |   | (3,990  | )
|Accounts payable                                                                       |  |                   | (16,079 | )              |   | (735    | )
|Accrued payroll and related costs                                                      |  |                   | (10,529 | )              |   | 954     |  
|Advance payments from customers                                                        |  |                   | (16,117 | )              |   | 1,725   |  
|Accrued warranty costs                                                                 |  |                   | 1,796   |                |   | 93      |  
|Other liabilities                                                                      |  |                   | (4,197  | )              |   | 934     |  
|Contributions to pension benefit plan                                                  |  |                   | (222    | )              |   | (229    | )
|Operating activities of discontinued
 operations                                       |  |                   | 132     |                |   | 167     |  
|Net cash provided by operating activities                                              |  |                   | 36,895  |                |   | 27,186  |  
|                                                                                       |  |                   |         |                |   |         |  
|Cash flows from investing activities:                                                  |  |                   |         |                |   |         |  
|Purchases of property and equipment                                                    |  |                   | (7,691  | )              |   | (6,753  | )
|Proceeds from maturity of short-term
 investments                                      |  |                   |        |                |   | 19,050  |  
|Purchases of short-term investments                                                    |  |                   |        |                |   | (2,000  | )
|Purchase of business                                                                   |  |                   | (21,870 | )              |   |        |  
|Net proceeds from sale of business                                                     |  |                   |        |                |   | 11,864  |  
|Investing activities of discontinued
 operations                                       |  |                   |        |                |   | (287    | )
|Net cash (used in) provided by investing
 activities                                   |  |                   | (29,561 | )              |   | 21,874  |  
|                                                                                       |  |                   |         |                |   |         |  
|Cash flows from financing activities:                                                  |  |                   |         |                |   |         |  
|Net proceeds (repayments) under short-term
 borrowings                                 |  |                   | 15,823  |                |   | (157    | )
|Payments of long-term debt                                                             |  |                   | (1,154  | )              |   | (1,154  | )
|Excess tax benefits from stock-based
 compensation                                     |  |                   | 4       |                |   | 691     |  
|Cash dividends                                                                         |  |                   | (7,604  | )              |   | (7,945  | )
|Proceeds from exercise of stock options and
 employee stock purchase plan              |  |                   | 1,263   |                |   | 3,708   |  
|Payments to purchase and retire common
 stock                                          |  |                   | (9,450  | )              |   | (36,992 | )
|Net cash used in financing activities                                                  |  |                   | (1,118  | )              |   | (41,849 | )
|                                                                                       |  |                   |         |                |   |         |  
|Effect of exchange rate on changes in cash                                             |  |                   | (1,373  | )              |   | 8,319   |  
|Net increase in cash and cash equivalents                                              |  |                   | 4,843   |                |   | 15,530  |  
|                                                                                       |  |                   |         |                |   |         |  
|Cash and cash equivalents, at beginning of
 period                                     |  |                   | 114,099 |                |   | 104,345 |  
|Cash and cash equivalents, at end of period                                            |  | $                 | 118,942 |                | $ | 119,875 |  
|                                                                                       |  |                   |         |                |   |         |  
|Supplemental disclosure of cash flow
 information:                                     |  |                   |         |                |   |         |  
|Cash paid during the period for -                                                      |  |                   |         |                |   |         |  
|Interest                                                                               |  | $                 | 1,159   |                | $ | 457     |  
|Income taxes                                                                           |  | $                 | 8,638   |                | $ | 15,415  |  

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

4

---



Table of Contents

MTS SYSTEMS CORPORATIONCONDENSED 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 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. 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 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
27, 2008 filed with the SEC. Interim results of operations for the three- and
nine-month periods ended June 27, 2009 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. Orders that are manufactured and delivered in less than six months
with routine installations and no special acceptance protocol may involve
separable elements for revenue recognition purposes. Sufficient evidence of
fair value of these elements exists to allow revenue recognition for these
systems upon shipment, less the greater of the fair value associated with
installation and training (if applicable) or the amount of revenue for which
payment is deemed contingent upon delivery of these elements, which amount is
deferred until customer acceptance. Fair value is determined based upon the
sale price of similar products sold individually. In cases where special
acceptance protocols exist, installation and training are not considered to be
separable from the other elements of the arrangement. Accordingly, revenue for
these systems is recognized upon the completion of installation and fulfillment
of obligations specific to the terms of the arrangement.

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,
software, installation services, training and support. In certain arrangements
software may be essential to the functionality of the system deliverable. For
these arrangements the Company considers Emerging Issues Task Force (EITF)
No. 03-05, Applicability of AICPA Statement of Position 97-2 to Non-Software
Deliverables in an Arrangement Containing More-Than-Incidental Software, to
identify components of the arrangement which are considered software-related.
For software and software-related components, the Company applies the
requirements of Statement of Position (SOP) No. 97-2, Software Revenue
Recognition, when recognizing revenue. Contractual arrangements in which
software is essential to system functionality typically include significant
production, modification, and customization. For 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 prescribed by SOP No. 81-1, Accounting for
Performance of Construction-Type and Certain Production-Type Contracts, 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 SOP
No. 81-1 (e.g. software maintenance and training) are accounted for as the
service is provided based on fair value as determined by standalone sales.

The Company enters into
long-term contracts for customized equipment sold to its customers. Under the
terms of such 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.

5

---



Table of Contents

Revenue for services is
recognized as the service is performed or ratably over a defined contractual
period for service maintenance contracts.

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 June 27, 2009 and September 27, 2008 were as
follows:

|                                                  |  |                          |        |                    |   |        | 
|------------------------------------------------- |  | ------------------------ | ------ | ------------------ | - | ------ | 
|                                                  |  | June 27, 2009            |        | September 27, 2008 |  
|                                                  |  | (expressed in thousands) |       
|Customer projects in various stages of completion |  | $                        | 13,654 |                    | $ | 14,257 | 
|Components, assemblies and parts                  |  |                          | 36,110 |                    |   | 31,878 | 
|Total                                             |  | $                        | 49,764 |                    | $ | 46,135 | 

Impairment of Long-Lived Assets. In accordance with SFAS No. 144,
Accounting for Impairment or Disposal 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 sale 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.

Business Acquisitions. The Company accounts for acquired
businesses using the purchase method of accounting, which requires that the
assets acquired and liabilities assumed be recorded at the date of acquisition
at their respective fair values. The judgments made in determining the
estimated fair value assigned to each class of assets acquired and liabilities
assumed, as well as asset lives, can materially impact net income. Determining
the useful life of an intangible asset also requires judgment. For example,
different types of intangible assets will have different useful lives and
certain assets may even be considered to have indefinite useful lives. All of
these judgments and estimates can significantly impact net income. See Note 3
in the Condensed Notes to Consolidated Financial Statements for additional
information on business acquisitions.

Software Development Costs. The Company capitalizes certain software
development costs related to software to be sold, leased, or otherwise marketed
in accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
Accounting for the Costs of Computer 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. The 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. The Company
reached technological feasibility for certain software products and began
capitalizing software development costs during the fiscal year ended September
27, 2008. See Note 4 in the Condensed Notes to Consolidated Financial
Statements for additional information on capitalized software development
costs.

6

---



Table of Contents

Warranty Obligations. Sales of the Companys products and systems
are subject to limited warranty guarantees that are included in customer
contracts. For sales that include installation services, warranty guarantees
typically extend for a period of twelve months from
the date of either shipment or acceptance. Product guarantees 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 warranty provisions monthly 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. Warranty provisions
and claims for the periods ended June 27, 2009 and June 28, 2008 were as
follows:

|                     |  |                          |        |                   |   |                |   |                |        |   |   |        |  
|-------------------- |  | ------------------------ | ------ | ----------------- | - | -------------- | - | -------------- | ------ | - | - | ------ | -
|                     |  | Three Months Ended       |        | Nine Months Ended |  
|                     |  | June 27,
 2009           |        | June 28,
 2008    |   | June 27,
 2009 |   | June 28,
 2008 |       
|                     |  | (expressed in thousands) |       
|Beginning balance    |  | $                        | 8,196  |                   | $ | 6,294          |   | $              | 6,107  |   | $ | 6,205  |  
|Warranty provisions  |  |                          | 2,269  |                   |   | 2,426          |   |                | 8,254  |   |   | 5,756  |  
|Warranty claims      |  |                          | (2,694 | )                 |   | (2,222         | ) |                | (6,458 | ) |   | (5,750 | )
|Acquisition of SANS  |  |                          |       |                   |   |               |   |                | 73     |   |   |       |  
|Currency translation |  |                          | 112    |                   |   | 15             |   |                | (93    | ) |   | 302    |  
|Ending balance       |  | $                        | 7,883  |                   | $ | 6,513          |   | $              | 7,883  |   | $ | 6,513  |  

Stock-Based Compensation. The Company compensates officers,
directors, and employees with stock-based compensation under four stock plans
approved by the Companys shareholders in 1994, 1997, 2002 and 2006. These
stock plans are administered under the supervision of the Companys Board of
Directors. The Company has awarded stock options, employee stock purchase plan
shares, and restricted stock under these plans. At June 27, 2009, a total of
1,846,980 shares were available for future grant under the 2002 and 2006 plans.
Stock-based compensation expense is determined in accordance with SFAS No. 123R
based on the grant-date fair value and is recognized proportionally over the
vesting period of each grant, which is generally three years. Stock-based
compensation expense for the three-month periods ended June 27, 2009 and June
28, 2008 was $0.9 million and $1.1 million, respectively. Stock-based compensation
expense for the nine-month periods ended June 27, 2009 and June 28, 2008 was
$2.9 million and $3.3 million, respectively.

For purposes of determining
estimated fair value of stock-based payment awards, the Company utilizes a
Black-Scholes option pricing model, which requires the input of certain
assumptions requiring management judgment. Because the Companys employee stock
option awards have characteristics significantly different from those of traded
options, and because changes in the input assumptions can materially affect
fair value estimates, existing models may not provide a reliable single measure
of the fair value of employee stock options. Management will continue to assess
the assumptions and methodologies used to calculate estimated fair value of
stock-based compensation. Circumstances may change and additional data may
become available over time that could result in changes to these assumptions
and methodologies and thereby materially impact the fair value determination of
future grants of stock-based payment awards. If factors change and the Company
employs different assumptions in the application of SFAS No. 123R in future
periods, the compensation expense recorded under SFAS No. 123R may differ
significantly from the stock-based compensation expense recorded in the current
period.

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.

7

---



Table of Contents

2. Recent Accounting Pronouncements

In December 2007, the FASB
issued SFAS No. 141 (revised 2007) (SFAS No. 141R), Business Combinations.
SFAS No. 141R expands the definition of a business combination and requires the
fair value of the purchase price of an acquisition, including the issuance of
equity securities, to be determined on the acquisition date. SFAS No. 141R also
requires that all assets, liabilities, contingent considerations, and
contingencies of an acquired business be recorded at fair value at the
acquisition date. In addition, SFAS No. 141R requires that acquisition costs
generally be expensed as incurred, restructuring costs generally be expensed in
periods subsequent to the acquisition date and changes in accounting for deferred
tax asset valuation allowances and acquired income tax uncertainties after the
measurement period impact income tax expense. SFAS No. 141R is effective for
the Companys fiscal years beginning on or after December 15, 2008, with early
adoption prohibited. The Company does not expect the adoption of SFAS No. 141R
to have a material impact on its consolidated financial statements.

In December 2007, the FASB
issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements, an Amendment of ARB No. 51. SFAS No. 160 requires minority
interests to be recharacterized as noncontrolling interests and reported as a
component of equity. In addition, SFAS No. 160 requires that purchases or sales
of equity interests that do not result in a change in control be accounted for
as equity transactions and, upon a loss of control, requires the interests
sold, as well as any interests retained, to be recorded at fair value with any
gain or loss recognized in earnings. SFAS No. 160 is effective for fiscal years
beginning on or after December 15, 2008, with early adoption prohibited. The
Company does not expect the adoption of SFAS No. 160 to have a material impact
on its consolidated financial statements.

In April 2008, the FASB
issued Staff Position (FSP) No. FAS 142-3 Determination of the Useful Life
of Intangible Assets. FSP No. 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of intangible assets under SFAS No. 142 Goodwill and Other
Intangible Assets. FSP No. FAS 142-3 is intended to improve the consistency
between the useful life of a recognized intangible asset under SFAS No. 142 and
the period of the expected cash flows used to measure the fair value of the asset
under SFAS No. 141R and other GAAP. FSP No. FAS 142-3 is effective for fiscal
years beginning after December 15, 2008, with early adoption prohibited. The
Company does not expect the adoption of FSP No. FAS 142-3 to have a material
impact on its consolidated financial statements.

In June 2008, the FASB
issued FSP No. EITF 03-6-1 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities FSP No. EITF
03-6-1 clarifies that all outstanding unvested share-based payment awards that
contain rights to nonforfeitable dividends participate in undistributed
earnings with common shareholders. Awards of this nature are considered
participating securities and the two-class method of computing basic and
diluted earnings per share must be applied. FSP No. EITF 03-6-1 is effective
for fiscal years beginning after December 15, 2008. The Company does not expect
the adoption of FSP No. EITF 03-6-1 to have a material impact on its
consolidated financial statements.

In June 2008, the FASB
issued EITF No. 07-5, Determining Whether an Instrument (or an Embedded
Feature) Is Indexed to an Entitys Own Stock. EITF No. 07-5 provides that an
entity should use a two step approach to evaluate whether an equity-linked
financial instrument (or embedded feature) is indexed to its own stock,
including evaluating the instruments contingent exercise and settlement
provisions. It also clarifies the impact of foreign currency denominated strike
prices and market-based employee stock option valuation instruments on the
evaluation. EITF No. 07-5 is effective for fiscal years beginning after
December 15, 2008. The Company does not expect the adoption of EITF No. 07-5 to
have a material impact on its consolidated financial statements.

In December 2008, the FASB
issued FSP FAS 132R-1, Employers Disclosures about Postretirement Benefit
Plan Assets. FSP No. 132R-1 amends SFAS No. 132 (revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits, and requires
additional disclosures regarding defined benefit plan assets, including
investment policies and strategies, major categories of plan assets, valuation
techniques used to measure the fair value of plan assets and significant
concentrations of risk within plan assets. FSP No. 132R-1 is effective for
fiscal years ending after December 15, 2009. The Company does not expect the
adoption of FSP No. 132R-1 to have a material impact on its consolidated
financial statements.

8

---



Table of Contents

In April 2009, the FASB
issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of
Financial Instruments. FSP FAS 107-1 and APB 28-1 amended SFAS No 107,
Disclosures about Fair Value of Financial Instruments, to require disclosure
of the carrying amount and the fair value of all financial instruments for
interim reporting periods and annual financial statements of publicly traded
companies, including the methods and significant assumptions used to estimate
the fair values and any changes in such methods and assumptions. FSP 107-1 and
APB 28-1 also amends APB Opinion No. 28, Interim Financial Reporting, to
require disclosures in summarized financial information at interim reporting
periods. FSP 107-1 and APB 28-1 is effective for interim reporting periods
ending after June 15, 2009. The Companys adoption of the provisions of FSP
107-1 and APB 28-1 during the three month period ended June 27, 2009 did not
have an impact on the consolidated financial statements.

In May 2009, the FASB issued
SFAS No. 165, Subsequent Events. SFAS No. 165 establishes general standards
or accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
In addition, SFAS No. 165 sets forth the period after the balance sheet date
during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in
financial statements, the circumstances under which an entity should recognize
events or transactions occurring after the balance sheet date in its financial
statements, and the disclosures an entity should make about events or
transactions that occurred after the balance sheet date. SFAS No. 165 is
effective for interim or annual financial periods ending after June 15, 2009.
The Companys adoption of the provisions of SFAS No. 165 during the three month
period ended June 27, 2009 did not have an impact on the consolidated financial
statements.

3. Acquisitions and Divestitures

Discontinued Operations. On June 27, 2008, the Company sold
substantially all of the net assets of its Nano Instruments product line, which
was based in Oak Ridge, Tennessee. As a result of this sale, the Company
recorded a gain of $2.5 million, net of tax of $3.6 million, in the third
quarter of fiscal year 2008. The Nano Instruments product line was historically
included in the Companys Test segment for financial reporting. The results of
operations of the Nano Instruments product line, including the gain on the
sale, have been excluded from the results of operations of the Test segment and
are reported as discontinued operations.

The Company does not
allocate interest income or interest expense to discontinued operations.
Operating results of the discontinued operations, included in the Companys
results for the three- and nine-month periods ended June 27, 2009 and June 28,
2008, were as follows:

|                                                                              |  |                          |   |                   |   |                |   |                |     |   |   |       |  
|----------------------------------------------------------------------------- |  | ------------------------ | - | ----------------- | - | -------------- | - | -------------- | --- | - | - | ----- | -
|                                                                              |  | Three Months Ended       |   | Nine Months Ended |  
|                                                                              |  | June 27,
 2009           |   | June 28,
 2008    |   | June 27,
 2009 |   | June 28,
 2008 |    
|                                                                              |  | (expressed in thousands) |  
|Revenue                                                                       |  | $                        |  |                   | $ | 956            |   | $              | 128 |   | $ | 5,996 |  
|(Loss) income from discontinued operations before taxes and net gain
 on sale |  |                          |  |                   |   | (1,100         | ) |                | 36  |   |   | (706  | )
|Benefit (provision) for income taxes                                          |  |                          |  |                   |   | 414            |   |                | (11 | ) |   | 289   |  
|(Loss) income from discontinued operations, net of tax                        |  | $                        |  |                   | $ | (686           | ) | $              | 25  |   | $ | (417  | )

The assets and liabilities
of discontinued operations at June 27, 2009 and September 27, 2008 were as
follows:

|                                                              |  |                          |     |                    |   |     | 
|------------------------------------------------------------- |  | ------------------------ | --- | ------------------ | - | --- | 
|                                                              |  | June 27, 2009            |     | September 27, 2008 |  
|                                                              |  | (expressed in thousands) |    
|Accounts receivable, net of
 allowances for doubtful accounts |  | $                        | 127 |                    | $ | 149 | 
|Unbilled accounts
 receivable                                 |  |                          |    |                    |   | 88  | 
|Current deferred tax assets                                   |  |                          | 143 |                    |   | 143 | 
|Total assets of
 discontinued operations                      |  | $                        | 270 |                    | $ | 380 | 
|                                                              |  |                          |     |                    |   |     | 
|Accrued income taxes                                          |  | $                        | 174 |                    | $ | 177 | 
|Total liabilities of
 discontinued operations                 |  | $                        | 174 |                    | $ | 177 | 

Business Acquisition.On September 28, 2008, the Company acquired
substantially all of the assets of SANS Group (SANS). SANS has manufacturing
facilities in both Shenzhen and Shanghai, China, and is headquartered in
Shenzhen. SANS manufactures material testing solutions and offers a variety of
products, including electro-mechanical and static-hydraulic testing machines.
The acquisition accelerates the Companys China growth strategy while also
broadening its product offering worldwide.

9

---



Table of Contents

The total purchase price for
SANS was $50.2 million, including direct acquisition costs of $2.9 million. As
of June 27, 2009, approximately $38.5 million of the purchase price was paid.
The remaining liability of approximately $11.7 million is included in Other
Accrued Liabilities on the June 27, 2009 Consolidated Balance Sheet. The
results of operations for SANS have been included in the Companys Consolidated
Statements of Income since the date of acquisition, and are reported in the
Companys Test segment. Pro forma results have not been included, since the
impact of the acquisition was not material.

The purchase price for SANS
has been preliminarily allocated based on the fair values of assets acquired
and liabilities assumed. The final valuation of net assets will be completed no
later than one year from the acquisition date. The following table summarizes
the preliminary allocation of the SANS purchase price, including acquisition
costs, to the fair values of the assets acquired and liabilities assumed at the
date of acquisition:

|                                                           |  |                          |        | 
|---------------------------------------------------------- |  | ------------------------ | ------ | 
|                                                           |  | September 28, 2008       |       
|                                                           |  | (expressed in thousands) |       
|Accounts receivable,
 inventories and other current assets |  | $                        | 18,417 | 
|Property and equipment                                     |  |                          | 7,771  | 
|Other intangible assets (1)                                |  |                          | 16,747 | 
|Goodwill                                                   |  |                          | 14,620 | 
|Total assets acquired                                      |  |                          | 57,555 | 
|Current liabilities assumed                                |  |                          | 7,318  | 
|Net assets acquired                                        |  | $                        | 50,237 | 

(1) Intangible assets
include patents, trade names and non-compete agreements in the amounts of $9.2
million, $5.1 million and $2.4 million, respectively. See Note 4 in the
Condensed Notes to Consolidated Financial Statements for additional information
on intangible assets.

4. Capital Assets

Property and Equipment

Property and equipment at
June 27, 2009 and September 27, 2008 consist of the following:

|                               |  |                          |         |                     |   |         |  
|------------------------------ |  | ------------------------ | ------- | ------------------- | - | ------- | -
|                               |  | June 27,
 2009           |         | September 27,
 2008 |  
|                               |  | (expressed in thousands) |        
|Land and improvements          |  | $                        | 2,809   |                     | $ | 1,668   |  
|Buildings and improvements     |  |                          | 51,081  |                     |   | 45,700  |  
|Machinery and equipment        |  |                          | 95,132  |                     |   | 91,851  |  
|                               |  |                          | 149,022 |                     |   | 139,219 |  
|Less accumulated
 depreciation |  |                          | (91,764 | )                   |   | (88,685 | )
|Property and equipment,
 net   |  | $                        | 57,258  |                     | $ | 50,534  |  

Goodwill

The changes to the carrying
amount of goodwill for the three- and nine-month periods ended June 27, 2009
and June 28, 2008 were as follows:

|                     |  |                          |        |                   |   |                |   |                |        |   |   |       | 
|-------------------- |  | ------------------------ | ------ | ----------------- | - | -------------- | - | -------------- | ------ | - | - | ----- | 
|                     |  | Three Months Ended       |        | Nine Months Ended |  
|                     |  | June 27,
 2009           |        | June 28,
 2008    |   | June 27,
 2009 |   | June 28,
 2008 |       
|                     |  | (expressed in thousands) |       
|Beginning balance    |  | $                        | 15,791 |                   | $ | 1,748          |   | $              | 1,668  |   | $ | 1,642 | 
|Acquisition of SANS  |  |                          | 266    |                   |   |               |   |                | 14,620 |   |   |      | 
|Currency translation |  |                          | 78     |                   |   | (1             | ) |                | (153   | ) |   | 105   | 
|Ending balance       |  | $                        | 16,135 |                   | $ | 1,747          |   | $              | 16,135 |   | $ | 1,747 | 

At June 27, 2009, $14.5
million and $1.6 million of goodwill was associated with the Test and Sensors
segments, respectively. At June 28, 2008, goodwill of $1.7 million was
associated entirely with the Sensors segment.

10

---



Table of Contents

Other Intangible Assets

Other
intangible assets at June 27, 2009 and September 27, 2008 consist of the
following:

|                           |  |                          |        |                           |   |                     |   |                                             |        |  |     
|-------------------------- |  | ------------------------ | ------ | ------------------------- | - | ------------------- | - | ------------------------------------------- | ------ |  | ----
|                           |  | June 27, 2009           
|                           |  | Gross Carrying
 Amount   |        | Accumulated
 Amortization |   | Net Carrying
 Value |   | Weighted
 Average
 Useful Life
 (in Years) 
|                           |  | (expressed in thousands) |        |                          
|Software development costs |  | $                        | 6,859  |                           | $ | (472                | ) | $                                           | 6,387  |  | 5.0 
|Patents                    |  |                          | 9,204  |                           |   | (488                | ) |                                             | 8,716  |  | 15.4
|Trademarks and trade names |  |                          | 5,571  |                           |   | (365                | ) |                                             | 5,206  |  | 30.2
|Non-compete agreements     |  |                          | 2,429  |                           |   | (607                | ) |                                             | 1,822  |  | 3.0 
|                           |  | $                        | 24,063 |                           | $ | (1,932              | ) | $                                           | 22,131 |  | 14.6
|                           |  |                          |        |                           |   |                     |   |                                             |        |  |     
|                           |  | September 27, 2008      
|                           |  | Gross Carrying
 Amount   |        | Accumulated
 Amortization |   | Net Carrying
 Value |   | Weighted
 Average
 Useful Lives
 (in Years)
|                           |  | (expressed in thousands) |        |                          
|Software development costs |  | $                        | 4,155  |                           | $ |                    |   | $                                           | 4,155  |  | 5.0 
|Trademarks and trade names |  |                          | 435    |                           |   | (227                | ) |                                             | 208    |  | 33.0
|                           |  | $                        | 4,590  |                           | $ | (227                | ) | $                                           | 4,363  |  | 7.7 

Amortization
expense recognized during the three-month periods ended June 27, 2009 and June
28, 2008 was $0.7 million and less than $0.1 million, respectively.
Amortization expense recognized during the nine-month periods ended June 27,
2009 and June 28, 2008 was $1.7 million and less than $0.1 million,
respectively. The estimated future amortization expense related to other
intangible assets for the next five fiscal years is as follows:

| |                    |  |                          |      
| | ------------------ |  | ------------------------ | -----
| | Fiscal Year        |  | Amortization Expense    
| |                    |  | (expressed in thousands)
| | Remainder
 of 2009 |  | $                        | 668  
| | 2010               |  | $                        | 2,675
| | 2011               |  | $                        | 2,674
| | 2012               |  | $                        | 1,864
| | 2013               |  | $                        | 1,864

Future
amortization amounts presented above are estimates. Actual future amortization
expense may be different, due to future acquisitions, impairments, changes in
amortization periods, or other factors.

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 options and
grants, 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 1.4 million and 1.1 million weighted common
shares have been excluded from diluted weighted shares outstanding for the
three-month periods ended June 27, 2009 and June 28, 2008, respectively. Stock
options to acquire 1.3 million and 0.8 million weighted common shares have been
excluded from diluted weighted shares outstanding for the nine-month periods
ended June 27, 2009 and June 28, 2008, respectively. The potentially dilutive
effect of common shares issued in connection with outstanding stock options is
determined based on income before discontinued operations. A reconciliation of
these amounts is as follows:

11

---



Table of Contents

|                                                 |  |                                                 |        |                   |   |                |  |                |        |  |   |       
|------------------------------------------------ |  | ----------------------------------------------- | ------ | ----------------- | - | -------------- |  | -------------- | ------ |  | - | ------
|                                                 |  | Three Months Ended                              |        | Nine Months Ended
|                                                 |  | June 27,
 2009                                  |        | June 28,
 2008    |   | June 27,
 2009 |  | June 28,
 2008
|                                                 |  | (expressed in thousands, except per share data)
|                                                 |  |                                                
|Income before discontinued
 operations           |  | $                                               | 3,149  |                   | $ | 10,985         |  | $              | 20,348 |  | $ | 32,611
|Income from discontinued
 operations, net of tax |  |                                                 |       |                   |   | 1,765          |  |                | 25     |  |   | 2,034 
|Net income                                       |  | $                                               | 3,149  |                   | $ | 12,750         |  | $              | 20,373 |  | $ | 34,645
|                                                
|Weighted average common
 shares outstanding      |  |                                                 | 16,741 |                   |   | 17,150         |  |                | 16,839 |  |   | 17,484
|Dilutive potential common
 shares                |  |                                                 | 24     |                   |   | 174            |  |                | 39     |  |   | 199   
|Total diluted weighted
 shares outstanding       |  |                                                 | 16,765 |                   |   | 17,324         |  |                | 16,878 |  |   | 17,683
|                                                
|Earnings per share:                              |  |                                                 |        |                   |   |                |  |                |        |  |   |       
|Basic-                                           |  |                                                 |        |                   |   |                |  |                |        |  |   |       
|Income before discontinued operations            |  | $                                               | 0.19   |                   | $ | 0.64           |  | $              | 1.21   |  | $ | 1.86  
|Income from discontinued operations, net of tax  |  |                                                 |       |                   |   | 0.10           |  |                |       |  |   | 0.12  
|Earnings per share                               |  | $                                               | 0.19   |                   | $ | 0.74           |  | $              | 1.21   |  | $ | 1.98  
|                                                
|Diluted -                                        |  |                                                 |        |                   |   |                |  |                |        |  |   |       
|Income before discontinued operations            |  | $                                               | 0.19   |                   | $ | 0.64           |  | $              | 1.21   |  | $ | 1.84  
|Income from discontinued operations, net of tax  |  |                                                 |       |                   |   | 0.10           |  |                |       |  |   | 0.12  
|Earnings per share                               |  | $                                               | 0.19   |                   | $ | 0.74           |  | $              | 1.21   |  | $ | 1.96  

6. Business Segment Information

The Companys
Chief Executive Officer and management regularly review financial information
for the Companys three discrete operating units. Based on similarities in the
economic characteristics, nature of products and services, production
processes, type or class of customer served, method of distribution and
regulatory environments, the operating units have been aggregated for financial
statement purposes and categorized into two reportable segments: Test and
Sensors. The Test segment provides testing equipment, systems, and services
to the ground vehicles, aerospace, and infrastructure markets. The Sensors
segment provides high-performance position sensors for a variety of industrial
and vehicular 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 27, 2008. 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 periods ended June 27, 2009 and June
28, 2008 was as follows:

|                                   |  |                          |        |                          |   |                |  |                |         |  |   |        
|---------------------------------- |  | ------------------------ | ------ | ------------------------ | - | -------------- |  | -------------- | ------- |  | - | -------
|                                   |  | Three Months Ended       |        | Nine Months Ended       
|                                   |  | June 27,
 2009           |        | June 28,
 2008           |   | June 27,
 2009 |  | June 28,
 2008
|                                   |  | (expressed in thousands) |        | (expressed in thousands)
|Revenue by Segment:                |  |                          |        |                          |   |                |  |                |         |  |   |        
|Test                               |  | $                        | 76,505 |                          | $ | 92,401         |  | $              | 264,642 |  | $ | 264,396
|Sensors                            |  |                          | 14,274 |                          |   | 24,485         |  |                | 50,398  |  |   | 72,050 
|Total revenue                      |  | $                        | 90,779 |                          | $ | 116,886        |  | $              | 315,040 |  | $ | 336,446
|                                   |  |                          |        |                          |   |                |  |                |         |  |   |        
|Income from Operations by Segment: |  |                          |        |                          |   |                |  |                |         |  |   |        
|Test                               |  | $                        | 4,098  |                          | $ | 10,343         |  | $              | 22,409  |  | $ | 25,659 
|Sensors                            |  |                          | 710    |                          |   | 4,456          |  |                | 6,085   |  |   | 15,076 
|Total income from operations       |  | $                        | 4,808  |                          | $ | 14,799         |  | $              | 28,494  |  | $ | 40,735 

12

---



Table of Contents

Total assets
by reportable segment at June 27, 2009 and September 27, 2008 were as follows:

|                                |  |                          |         |                     |   |        
|------------------------------- |  | ------------------------ | ------- | ------------------- | - | -------
|                                |  | June 27,
 2009           |         | September 27,
 2008
|                                |  | (expressed in thousands)
|Identifiable Assets by Segment: |  |                          |         |                     |   |        
|Test                            |  | $                        | 298,484 |                     | $ | 301,346
|Sensors                         |  |                          | 94,157  |                     |   | 97,431 
|Discontinued Operations         |  |                          | 270     |                     |   | 380    
|Total assets                    |  | $                        | 392,911 |                     | $ | 399,157

7. Derivative Instruments and Hedging
Activities

Effective
December 28, 2008, the Company adopted the provisions of SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities, an Amendment
to SFAS No. 133. SFAS No. 161 amends and enhances the disclosure requirements
of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, and requires qualitative disclosures about objectives and
strategies for using derivatives, quantitative disclosures about fair value amounts
of gains and losses on derivative instruments, and disclosures about
credit-risk-related contingent features in derivative agreements.

The Companys
results of operations are 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 and 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 has made an
accounting policy decision to not offset fair value amounts recognized on these
derivative instruments. As of June 27, 2009, the Company does not have any
foreign exchange contracts with credit-risk related contingent features.

The Companys
foreign exchange cash flow hedges and interest rate swaps are designated and
qualify as hedging instruments pursuant to SFAS No. 133. The Companys balance
sheet hedges are accounted for and reported under the guidance of SFAS No. 52,
Foreign Currency Translation. The fair value of the Companys designated and
undesignated outstanding hedge derivative assets and liabilities were reported
in the June 27, 2009 Consolidated Balance Sheet as follows:

|                                                      |  |                                             |     |                            |   |      
|----------------------------------------------------- |  | ------------------------------------------- | --- | -------------------------- | - | -----
|                                                      |  | June 27, 2009                              
|                                                      |  | Prepaid Expenses
 and Other
 Current Assets |     | Other Accrued
 Liabilities
|                                                      |  | (expressed in thousands)                   
|Hedge derivatives
 designated under SFAS No. 133:     |  |                                             |     |                            |   |      
|Foreign exchange cash flow hedges                     |  | $                                           | 285 |                            | $ | 720  
|Interest rate swaps                                   |  |                                             |    |                            |   | 1,811
|Total hedge derivatives designated under SFAS No.
133 |  |                                             | 285 |                            |   | 2,531
|                                                      |  |                                             |     |                            |   |      
|Hedge derivatives not
 designated under SFAS No. 133: |  |                                             |     |                            |   |      
|Foreign exchange balance sheet hedges                 |  |                                             | 40  |                            |   | 535  
|Total hedge derivatives                               |  | $                                           | 325 |                            | $ | 3,066

13

---



Table of Contents

Foreign Currency Cash Flow Hedging

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 in
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. The Company periodically 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.

At June 27,
2009 and June 28, 2008, the Company had outstanding cash flow hedge currency
exchange contracts with gross notional U.S. dollar equivalent amounts of $31.5
million and $58.4 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 $16.8 million and $35.6 million
at June 27, 2009 and June 28, 2008, respectively. At June 27, 2009 the net
market value of the foreign currency exchange contracts was a net liability of
$0.4 million, consisting of $0.7 million in liabilities and $0.3 million in
offsetting assets. At June 28, 2008, the net market value of foreign currency
exchange contracts was a net liability of $0.1 million, consisting of $1.0
million in liabilities and $0.9 million in offsetting assets.

The pretax
amounts recognized in AOCI on currency exchange contracts for the three- and
nine-month periods ended June 27, 2009, including gains (losses) reclassified
into earnings in the Consolidated Statements of Income and gains (losses)
recognized in other comprehensive income (OCI), are as follows:

|                                                                                                                                                  |  |                                     |      |                                    |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ---- | ---------------------------------- | - | ------ | -
|                                                                                                                                                  |  | Three Months
 Ended
 June, 27
 2009 |      | Nine Months
 Ended
 June, 27
 2009 |  
|                                                                                                                                                  |  | (expressed in thousands)            |     
|Beginning unrealized net gain in AOCI                                                                                                             |  | $                                   | 71   |                                    | $ | 108    |  
|Net loss reclassified into Revenue (effective portion)                                                                                            |  |                                     | 139  |                                    |   | 1,175  |  
|Net (gain) loss reclassified into Revenue upon the removal of hedge
 designations on underlying foreign currency transactions that were cancelled |  |                                     | (97  | )                                  |   | 72     |  
|Net loss recognized in OCI (effective portion)                                                                                                    |  |                                     | (614 | )                                  |   | (1,856 | )
|Ending unrealized net loss in AOCI                                                                                                                |  | $                                   | (501 | )                                  | $ | (501   | )

The amount
recognized in earnings as a result of the ineffectiveness of cash flow hedges
was less than $0.1 million in the three- and nine-month periods ended June 27,
2009 and June 28, 2008. At June 27, 2009 and June 28, 2008, the amount
projected to be reclassified from AOCI into earnings in the next 12 months was
a net loss of $0.5 million and $0.2 million, respectively. The maximum
remaining maturity of any forward or optional contract at June 27, 2009 and
June 28, 2008 was 0.6 years and 0.8 years, respectively.

Interest Rate Swaps

The Company
also uses floating to fixed interest rate swaps to mitigate its exposure to
changes in interest rates related to a portion of its floating rate indebtedness.
The Company has designated these interest rate swaps as cash flow hedges. As a
result, changes in the fair value of the interest rate swap are recorded in
AOCI within Shareholders Investment on the Consolidated Balance Sheets.

At June 27,
2009, the Company had outstanding interest rate swaps with total notional
amounts of $40.0 million, which equals the amount of outstanding credit
facility borrowings as of that date. Every month, the Company pays fixed
interest on these interest rate swaps in exchange for interest received at
monthly U.S. LIBOR. At June 27, 2009, the weighted-average fixed interest rate
payable by the Company under the terms of the interest rate swap arrangements
was 3.31%. Because there is 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,
the overall effective interest rate applicable to outstanding credit facility
borrowings at June 27, 2009, under the terms of the credit facility borrowings
and interest rate swap agreements, was 3.76%. The total market value of the interest rate
swaps at June 27, 2009 was a liability of $1.8 million.

14

---



Table of Contents

The pretax
amounts recognized in AOCI on interest rate swaps for the three- and nine-month
periods ended June 27, 2009 are as follows:

|                                                                 |  |                                     |        |                                    |   |        |  
|---------------------------------------------------------------- |  | ----------------------------------- | ------ | ---------------------------------- | - | ------ | -
|                                                                 |  | Three Months
 Ended
 June, 27
 2009 |        | Nine Months
 Ended
 June, 27
 2009 |  
|                                                                 |  | (expressed in thousands)            |       
|Beginning unrealized net
 loss in AOCI                           |  | $                                   | (2,154 | )                                  | $ | (199   | )
|Net loss reclassified into
 Interest expense (effective portion) |  |                                     | 289    |                                    |   | 647    |  
|Net gain (loss) recognized
 in OCI (effective portion)           |  |                                     | 54     |                                    |   | (2,259 | )
|Ending unrealized net loss
 in AOCI                              |  | $                                   | (1,811 | )                                  | $ | (1,811 | )

Foreign Currency Balance Sheet Hedging

The Company
also uses currency exchange contracts to hedge 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 contracts are included in Other Income (Expense), net on the Consolidated
Statement of Income in the current period.

At June 27,
2009 and June 28, 2008, the Company had outstanding balance sheet hedge
currency exchange contracts with gross notional U.S. dollar equivalent amounts
of $56.0 million and $27.1 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 was $13.1
million at June 27, 2009 and $5.8 million at June 28, 2008. At June 27, 2009,
the net market value of the balance sheet foreign currency exchange contracts was
a net liability of $0.5 million, consisting of $0.5 million in liabilities with
less than $0.1 million in offsetting assets. On June 28, 2008, the net market
value of the balance sheet forward exchange contracts was a net asset of $0.2
million, consisting of $0.2 million in assets with less than $0.1 million in
offsetting liabilities.

The net losses
recognized in the Consolidated Statements of Income on balance sheet hedge
currency exchange contracts for the three- and nine-month periods ended June
27, 2009 are as follows:

|                                                    |  |                                     |      |                                    |   |        |  
|--------------------------------------------------- |  | ----------------------------------- | ---- | ---------------------------------- | - | ------ | -
|                                                    |  | Three Months
 Ended
 June, 27
 2009 |      | Nine Months
 Ended
 June, 27
 2009 |  
|                                                    |  | (expressed in thousands)            |     
|Net loss recognized in
 Other income (expense), net |  | $                                   | (271 | )                                  | $ | (1,224 | )

8. Fair Value Measurements

SFAS No. 157 Adoption

Effective
September 28, 2008, the Company adopted the provisions of SFAS No. 157, Fair
Value Measurements. SFAS No. 157 provides a framework for measuring fair value
under GAAP, and defines fair value as the price that would be received to sell
an asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date (exit price). SFAS 157 clarifies
that a fair value measurement should include an adjustment for risk, if market
participants would include a risk adjustment in pricing the related asset or
liability. 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, and
adjusts for non-performance and/or other risk associated with the Company as
well as counterparties, as appropriate.

15

---



Table of Contents

SFAS No. 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The three levels
of the fair value hierarchy are as follows:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Level 1:
 Inputs are unadjusted quoted prices which are available in active markets for
 identical assets or liabilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Level 2:
 Inputs are other-than-quoted prices in active markets included in Level 1,
 which are either directly or indirectly observable, such as quoted prices for
 similar assets or liabilities in active markets, or for identical assets or
 liabilities in inactive markets. Level 2 includes those financial assets and
 liabilities that are valued using models or other valuation methodologies.
 The models used are primarily industry-standard, and consider various
 assumptions, including quoted forward prices, time value, volatility factors,
 and current contractual prices for the underlying instruments, as well as
 other relevant economic measures. Substantially all of the assumptions used
 in these valuation models are observable in the marketplace.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Level 3:
 Inputs are unobservable and reflect the Companys own assumptions used to
 measure assets and liabilities at fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

The hierarchy
gives the highest priority to Level 1, as 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 June 27,
2009, financial assets and liabilities subject to fair value measurements on a
recurring basis are as follows:

|                        |  |                          |   |         |   |         |  |       |   |  |   |      
|----------------------- |  | ------------------------ | - | ------- | - | ------- |  | ----- | - |  | - | -----
|                        |  | Level 1                  |   | Level 2 |   | Level 3 |  | Total
|                        |  | (expressed in thousands)
|Assets:                 |  |                          |   |         |   |         |  |       |   |  |   |      
|Derivative contracts(1) |  | $                        |  |         | $ | 325     |  | $     |  |  | $ | 325  
|Total assets            |  | $                        |  |         | $ | 325     |  | $     |  |  | $ | 325  
|                        |  |                          |   |         |   |         |  |       |   |  |   |      
|Liabilities:            |  |                          |   |         |   |         |  |       |   |  |   |      
|Derivative contracts(1) |  | $                        |  |         | $ | 1,255   |  | $     |  |  | $ | 1,255
|Interest rate swaps(2)  |  |                          |   |         |   | 1,811   |  |       |  |  |   | 1,811
|Total liabilities       |  | $                        |  |         | $ | 3,066   |  | $     |  |  | $ | 3,066

| |     |                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------
| | (1) | Based on
 observable market transactions of spot currency rates and forward currency
 rates on equivalently-termed instruments.
| |     |                                                                                                                                
| | (2) | Based on
 LIBOR and swap rates.                                                                                                

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. The Company believes that the fair value of its
fixed-rate long-term debt at June 27, 2009 approximates its carrying value,
based on consideration of the Companys current borrowing rates as well as the
short-term nature of its maturity.

9. Comprehensive Income

Comprehensive
Income, a component of Shareholders Investment, consists of net income,
pension benefit plan adjustments, derivative instrument gains or losses, and
foreign currency translation adjustments.

16

---



Table of Contents

Comprehensive
Income for the periods ended June 27, 2009 and June 28, 2008 was as follows:

|                                                                 |  |                          |        |                   |   |                |   |                |        |   |   |       
|---------------------------------------------------------------- |  | ------------------------ | ------ | ----------------- | - | -------------- | - | -------------- | ------ | - | - | ------
|                                                                 |  | Three Months Ended       |        | Nine Months Ended
|                                                                 |  | June 27,
 2009           |        | June 28,
 2008    |   | June 27,
 2009 |   | June 28,
 2008
|                                                                 |  | (expressed in thousands)
|                                                                 |  |                          |        |                   |   |                |   |                |        |   |   |       
|Net income                                                       |  | $                        | 3,149  |                   | $ | 12,750         |   | $              | 20,373 |   | $ | 34,645
|Change in cumulative translation adjustment                      |  |                          | 7,076  |                   |   | (673           | ) |                | (2,150 | ) |   | 12,156
|Pension benefit plan adjustments                                 |  |                          | (34    | )                 |   | 6              |   |                | (261   | ) |   | 18    
|(Decrease) increase in unrealized loss on derivative
instruments |  |                          | (139   | )                 |   | 733            |   |                | (1,371 | ) |   | 247   
|Comprehensive income                                             |  | $                        | 10,052 |                   | $ | 12,816         |   | $              | 16,591 |   | $ | 47,066

10. Financing

At June 27,
2009, outstanding borrowings under the credit facility were $40.0 million. In
order to mitigate its exposure to interest rate increases on its floating rate
indebtedness, the Company has entered into floating to fixed interest rate swap
agreements. At June 27, 2009, under the terms of the credit facility borrowings
and interest rate swap agreements, the effective weighted average fixed interest
rate applicable to outstanding credit facility borrowings was 3.76%. See Note 7
in the Condensed Notes to Consolidated Financial Statements for additional
information on the interest rate swaps.

Short-term
borrowings at June 27, 2009 and September 27, 2008 consist of the following:

|                                                                                                                                                                                                     |  |                          |        |                     |   |       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | ------------------- | - | ------
|                                                                                                                                                                                                     |  | June 27,
 2009           |        | September 27,
 2008
|                                                                                                                                                                                                     |  | (expressed in thousands)
|Bank line of credit,
 monthly U.S. LIBOR plus 45 basis points (0.83% rate in effect at June 27,
 2009), maturing July 2009, with optional month-to-month term renewal and loan
 repricing until 2012 |  | $                        | 11,000 |                     | $ | 11,000
|Bank line of credit,
 monthly U.S. LIBOR plus 45 basis points (0.83% rate in effect at June 27,
 2009), maturing July 2009, with optional month-to-month term renewal and loan
 repricing until 2012 |  |                          | 13,000 |                     |   | 13,000
|Bank line of credit,
 monthly U.S. LIBOR plus 45 basis points (0.83% rate in effect at June 27,
 2009), maturing July 2009, with optional month-to-month term renewal and loan
 repricing until 2012 |  |                          | 6,000  |                     |   |      
|Bank line of credit, monthly
 U.S. LIBOR plus 45 basis points (0.83% rate in effect at June 27, 2009),
 maturing July 2009, with optional month-to-month term renewal and loan
 repricing until 2012 |  |                          | 10,000 |                     |   |      
|Notes payable, non-interest
 bearing                                                                                                                                                                 |  |                          | 199    |                     |   | 338   
|Total short-term borrowings                                                                                                                                                                          |  | $                        | 40,199 |                     | $ | 24,338

11. Income Taxes

At September
27, 2008, the Companys liability for unrecognized tax benefits was $4.0
million, of which $1.3 million would favorably affect the Companys effective
tax rate if recognized. As of June 27, 2009, the Companys liability for
unrecognized tax benefits was $4.4 million, of which $1.7 million would
favorably affect the Companys effective tax rate if recognized. As of June 27,
2009, the Company does not expect significant changes in the amount of
unrecognized tax benefits during the next twelve months.

Legislation
was enacted in October 2008 that extended United States R&D credits, with
an effective date that is retroactive to January 1, 2008. As a result of this
legislation the Company recognized a tax benefit of approximately $1.0 million
during the three-month period ended December 27, 2008.

17

---



Table of Contents

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 periods ended June 27, 2009 and June 28, 2008 included the
following components:

|                                |  |                          |      |                          |   |                |  |                |      |   |   |    
|------------------------------- |  | ------------------------ | ---- | ------------------------ | - | -------------- |  | -------------- | ---- | - | - | ---
|                                |  | Three Months Ended       |      | Nine Months Ended       
|                                |  | June 27,
 2009           |      | June 28,
 2008           |   | June 27,
 2009 |  | June 28,
 2008
|                                |  | (expressed in thousands) |      | (expressed in thousands)
|                                |  |                          |      |                          |   |                |  |                |      |   |   |    
|Service cost                    |  | $                        | 101  |                          | $ | 142            |  | $              | 295  |   | $ | 414
|Interest cost                   |  |                          | 193  |                          |   | 191            |  |                | 563  |   |   | 556
|Expected return on plan
 assets |  |                          | (177 | )                        |   |               |  |                | (517 | ) |   |   
|Net amortization and
 deferral  |  |                          | 3    |                          |   | 9              |  |                | 10   |   |   | 26 
|Net periodic benefit cost       |  | $                        | 120  |                          | $ | 342            |  | $              | 351  |   | $ | 996

13. Severance Costs

In February
2009, the Company announced and initiated a workforce reduction, in order to
align the Companys operating cost structure with changing market conditions.
In June 2009, management of the Company approved a plan for an additional
workforce reduction in response to continued weakness in industrial capital
spending. As a result of the latter workforce reduction action, the Company
incurred severance and benefit costs totaling $1.2 million during the
three-month period ended June 27, 2009, of which $1.0 million and $0.2 million
was reported in the Test and Sensors segments, respectively. During the
nine-month period ended June 27, 2009, the Company incurred severance and
benefit costs totaling $4.0 million, of which $3.7 million and $0.3 million was
reported in the Test and Sensors segments, respectively. At June 27, 2009, the
remaining severance liability was $1.6 million, substantially all of which will
be paid over the next twelve months.

The following
table summarizes the severance charges included in the Companys Consolidated
Statement of Income for the three- and nine-month periods ended June 27, 2009:

|                            |  |                                     |       |                                    |   |      
|--------------------------- |  | ----------------------------------- | ----- | ---------------------------------- | - | -----
|                            |  | Three Months
 Ended
 June 27,
 2009 |       | Nine Months
 Ended
 June 27,
 2009
|                            |  | (expressed in thousands)           
|Cost of
 sales              |  | $                                   | 595   |                                    | $ | 1,778
|Selling and
 marketing      |  |                                     | 325   |                                    |   | 1,733
|General and
 administrative |  |                                     | 243   |                                    |   | 468  
|Total
 severance costs      |  | $                                   | 1,163 |                                    | $ | 3,979

18

---



Table of Contents

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

Forward-Looking Statements

Statements
contained in this Quarterly Report on Form 10-Q that are not statements of
historical fact should be considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the Act). In
addition, certain statements in our future filings with the SEC, in press
releases, and in oral and written statements made by us or with our approval
that are not statements of historical fact constitute forward-looking
statements within the meaning of the Act. Examples of forward-looking
statements include, but are not limited to: (i) projections of revenue, income
or loss, earnings or loss per share, the payment or nonpayment of dividends,
capital structure and other statements concerning future financial performance;
(ii) statements of our plans and objectives by our management or Board of
Directors, including those relating to products or services; (iii) statements
of assumptions underlying such statements; (iv) statements regarding business
relationships with vendors, customers or collaborators; and (v) statements
regarding products, their characteristics, performance, sales potential or
effect in the hands of customers. Words such as believes, anticipates,
expects, intends, targeted, should, potential, goals,
strategy,
and similar expressions are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements.

Forward-looking
statements involve risks and uncertainties that may cause actual results to
differ materially from those in such 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 Annual Report on Form 10-K for the fiscal year ended
September 27, 2008. Such important factors include:

| |   |                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------
| |  | We may
 experience difficulty obtaining materials or components for our products                                        
| |   |                                                                                                                         
| |  | We may
 experience difficulties obtaining the services of skilled employees                                             
| |   |                                                                                                                         
| |  | We may not
 achieve our growth plans for the expansion of our business                                                  
| |   |                                                                                                                         
| |  | We are
 significantly international in scope, which poses multiple unique risks                                         
| |   |                                                                                                                         
| |  | Our business
 could be adversely affected by product liability and commercial litigation                                
| |   |                                                                                                                         
| |  | Government
 regulation could impose significant costs and other constraints on our
 business                            
| |   |                                                                                                                         
| |  | We may fail
 to protect our intellectual property effectively, or may infringe upon the
 intellectual property of others
| |   |                                                                                                                         
| |  | The sales,
 delivery and acceptance cycle for many of our products is irregular and may
 not develop as anticipated     
| |   |                                                                                                                         
| |  | Our customers
 are in cyclical industries                                                                               
| |   |                                                                                                                         
| |  | Our business
 is subject to intense competition                                                                         
| |   |                                                                                                                         
| |  | Interest
 rate fluctuations could adversely affect our results of operations                                            
| |   |                                                                                                                         
| |  | Volatility
 in the global economy could adversely affect our results of operations                                      

The
performance of our business and our 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 2009.

About MTS Systems Corporation

MTS Systems
Corporation is a leading global supplier of test systems and
industrial position sensors. The Companys testing hardware and software solutions
help customers accelerate and improve their design, development, and manufacturing processes
and are used for determining the mechanical behavior of materials, products,
and structures. MTS high-performance position sensors provide controls for a
variety of industrial and vehicular applications. MTS had 1,660
employees and revenue of $461 million for the fiscal year ended September 27,
2008.

19

---



Table of Contents

Summary of Financial Results

Three Months Ended June 27, 2009 (Third
Quarter of Fiscal 2009)

Highlights for
the Third Quarter of Fiscal 2009 include:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Orders
 decreased 30.8% to $80.7 million, compared to $116.7 million for the Third
 Quarter of Fiscal 2008, as sharply lower demand in worldwide industrial
 capital spending in the Companys markets had a negative impact on both the
 Test and Sensors segments. Backlog of undelivered orders was $163.3 million,
 including $12.3 million from SANS, a decrease of 6.9% from backlog of $175.4
 million at March 28, 2009. Backlog at the end of the Third Quarter of Fiscal
 2008 was $242.8 million.                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | On a sequential
 basis, orders increased 16.7% compared to $69.2 million for the Second
 Quarter of Fiscal 2009, primarily driven by increased volume in the Test
 segment across all geographies. The increase in orders may be an
 indication that the global economic decline is beginning to bottom out however, the
 current uncertainty and volatility suggests the period of economic recovery
 will be long and slow.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Revenue
 decreased 22.3% to $90.8 million, compared to $116.9 million in the Third
 Quarter of Fiscal 2008. This decrease was primarily driven by a 21.2% decline
 in the organic Test business (where organic as used throughout Item 2. is
 defined as without the SANS acquisition) and a 38.4% decline in the Sensors
 segment, partially offset by a 5.6% benefit from SANS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | In June
 2009, the Company approved a plan for an additional workforce reduction, in
 response to the continued weakness in industrial capital spending. As a
 result of this action, the Company incurred severance and benefit costs
 totaling $1.2 million, of which $1.0 million and $0.2 million was reported in
 the Test and Sensors segments, respectively. Of the $1.2 million total costs,
 $0.6 million, $0.3 million, and $0.3 million were reported in Cost of Sales,
 Selling and Marketing, and General and Administrative expense, respectively.
 The Company anticipates further workforce and cost reduction actions in the
 Fourth Quarter of Fiscal 2009 related to materials sourcing and process and
 structure improvements. The Company estimates the combined workforce and
 other cost reduction actions taken during Fiscal 2009 will result in annual
 savings of $15-20 million for Fiscal 2010.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Income from
 operations decreased 67.6% to $4.8 million, compared to $14.8 million for the
 Third Quarter of Fiscal 2008, as the unfavorable impact of the volume decline
 in the organic Test business and Sensors segment, as well as severance and
 benefit costs associated with the previously mentioned planned workforce
 reduction, more than offset reduced operating expenses in both the organic
 Test business and the Sensors segment. SANS broke even during the quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Earnings per
 diluted share from continuing operations decreased $0.45, or 70.3%, to $0.19,
 compared to $0.64 for the Third Quarter of Fiscal 2008. Lower income from
 operations and unfavorable net interest negatively impacted earnings per
 diluted share by $0.42 and $0.06, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Earnings per
 diluted share from net income decreased $0.55, or 74.3%, to $0.19, compared
 to $0.74 for the Third Quarter of Fiscal 2008. During the Third Quarter of
 Fiscal 2008, the Company sold substantially all of the net assets of its Nano
 Instruments product line, which resulted in the recognition of a net gain
 from discontinued operations of $1.8 million, or $0.10 per diluted share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | Cash and
 cash equivalents at the end of the quarter totaled $118.9 million, compared
 to $99.3 million at the end of the prior quarter. Cash flows from operations
 generated $21.2 million, primarily driven by lower working capital
 utilization. During the quarter, the Company invested $1.8 million in capital
 expenditures, paid $2.5 million in dividends, and purchased 126,000 shares of
 common stock for $2.7 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Nine Months Ended June 27, 2009 (First Nine
Months of Fiscal 2009)

Highlights for
the First Nine Months of Fiscal 2009 include:

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On September
 28, 2008 the Company acquired substantially all of the assets of SANS Group
 (SANS) for $50.2 million. SANS has manufacturing facilities in both
 Shenzhen and Shanghai, China, and is headquartered in Shenzhen. SANS
 manufactures material testing solutions and offers a variety of products,
 including electromechanical and static-hydraulic testing machines. The
 results of operations for SANS have been included in the Companys results of
 operations since the date of the acquisition, and are reported in the
 Companys Test segment. Orders for SANS for the First Nine Months of Fiscal
 2009 were $18.1 million. SANS reported a $3.5 million loss from operations
 during the First Nine Months of Fiscal 2009, on $14.4 million of revenue,
 driven by reduced gross profit resulting from the sale of inventory that was
 written up to fair value as part of the acquisition, as well as increased
 operating expenses associated with integration-related items.

20

---



Table of Contents

| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Orders
 decreased 33.7% to $245.3 million, compared to $370.1 million for the First
 Nine Months of Fiscal 2008, as sharply lower demand in worldwide industrial
 capital spending in the Companys markets had a negative impact on both the
 Test and Sensors segments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Revenue
 decreased 6.4% to $315.0 million, compared to $336.4 million in the First
 Nine Months of Fiscal 2008. This decrease was primarily due to a 2.3%
 decrease in the organic Test business and a 26.9% decline in the Sensors
 segment. SANS provided a 4.3% benefit for the First Nine Months of Fiscal
 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | In February
 2009, the Company announced and initiated a workforce reduction, in order to
 align the Companys operating cost structure with changing market conditions.
 As previously mentioned, in June 2009, the Company approved a plan for an
 additional workforce reduction in response to continued weakness in
 industrial capital spending. As a result of these actions, the Company
 incurred severance and benefit arrangement costs totaling $4.0 million, of
 which $3.7 million and $0.3 million was reported in the Test and Sensors
 segments, respectively. Of the $4.0 million total costs, $1.8 million, $1.7
 million, and $0.5 million were reported in Cost of Sales, Selling and
 Marketing, and General and Administrative expense, respectively.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Income from
 operations decreased 30.0% to $28.5 million, compared to $40.7 million for
 the First Nine Months of Fiscal 2008, as the unfavorable impact of the volume
 decline in the organic Test business and Sensors segment, severance and
 benefit costs associated with the workforce reduction actions, as well as a
 $3.5 million operating loss from SANS, more than offset reduced variable
 compensation and other operating expenses in both the organic Test business
 and the Sensors segment.                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | The
 effective tax rate was 26.5%, an increase of 1.8 percentage points compared
 to a tax rate of 24.7% for the First Nine Months of Fiscal 2008. This
 increase was primarily due to a $3.7 million tax benefit from the
 repatriation of earnings from Japanese affiliates in the First Nine Months of
 Fiscal 2008, partially offset by a $1.0 million tax benefit from the retroactive
 extension of U.S. R&D credits in the First Nine Months of Fiscal 2009.                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Earnings per
 diluted share from continuing operations decreased $0.63, or 34.2%, to $1.21,
 compared to $1.84 for the First Nine Months of Fiscal 2008. Lower income from
 operations, unfavorable net interest, and unfavorable losses on foreign
 currency transactions negatively impacted earnings per diluted share by
 $0.51, $0.12 and $0.03, respectively.                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Earnings per
 diluted share from net income decreased $0.75, or 74.3%, to $1.21, compared
 to $1.96 for the First Half of Fiscal 2008. During the First Half of Fiscal
 2008, the Company sold substantially all of the net assets of its Nano
 Instruments product line, which resulted in the recognition of a net gain
 from discontinued operations of $2.0 million, or $0.12 per diluted share.                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | Cash and
 cash equivalents at June 27, 2009 totaled $118.9 million, compared to $114.1
 million at the end of Fiscal 2008. Cash flows from operations generated $36.9
 million. During the First Nine Months of Fiscal 2009, the Company borrowed
 $16.0 million from its credit facility, paid an additional $21.9 million for
 the acquisition of SANS, invested $7.7 million in capital expenditures, and
 purchased 371,500 shares of common stock for $9.5 million.                                                                                                                                                                                                                                                                                                    

Detailed Financial Results

|             
|-------------
|Total
Company

Orders and Backlog

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 orders, separately identifying the impact of the SANS acquisition as well
as the impact of currency translation (in millions):

|       |  |                                      |       |                           |   |                   |   |                       |     |                                      |   |      |   |   |      | 
|------ |  | ------------------------------------ | ----- | ------------------------- | - | ----------------- | - | --------------------- | --- | ------------------------------------ | - | ---- | - | - | ---- | 
|       |  | Three
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |     | Three
 Months
 Ended
 June 27,
 2009 |  
|Orders |  | $                                    | 116.7 |                           | $ | (39.4             | ) | $                     | 6.1 |                                      | $ | (2.7 | ) | $ | 80.7 | 

21

---



Table of Contents

Orders totaled
$80.7 million, a decrease of $36.0 million, or 30.8%, compared to orders of
$116.7 million for the Third Quarter of Fiscal 2008. This decrease is primarily
due to lower order volume in both the organic Test business and Sensors segment
across all geographies, partially offset by a $6.1 million increase from SANS.
Orders from international customers for the Third Quarter of Fiscal 2009 represented
72.4% of total orders, compared to 61.4% for the Third Quarter of Fiscal 2008.

Backlog of
undelivered orders at June 27, 2009 was $163.3 million, a decrease of 6.9% from
backlog of $175.4 million at March 28, 2009. Backlog at the end of the Third
Quarter of Fiscal 2009 included $12.3 million from SANS. Backlog at the end of
the Third Quarter of Fiscal 2008 was $242.8 million. The Company seldom
experiences order cancellations larger than $1.0 million; however, current
economic conditions could have an adverse impact on order cancellations in the
future.

Results of Operations

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 statements of operations (in millions, except per share data):

|                                                        |  |                     |      |                 |   |          |   |             |       |   |  |       |  
|------------------------------------------------------- |  | ------------------- | ---- | --------------- | - | -------- | - | ----------- | ----- | - |  | ----- | -
|                                                        |  | Three
 Months Ended |      |                 |   |          |   |             |      
|                                                        |  | June
 27,
 2009     |      | June
 28,
 2008 |   | Variance |   | %
 Variance |      
|Revenue                                                 |  | $                   | 90.8 |                 | $ | 116.9    |   | $           | (26.1 | ) |  | -22.3 | %
|Cost of sales                                           |  |                     | 56.2 |                 |   | 69.7     |   |             | (13.5 | ) |  | -19.4 | %
|Gross profit                                            |  |                     | 34.6 |                 |   | 47.2     |   |             | (12.6 | ) |  | -26.7 | %
|Gross margin                                            |  |                     | 38.1 | %               |   | 40.4     | % |             | -2.3  | % |  |       |  
|Operating expenses:                                     |  |                     |      |                 |   |          |   |             |       |   |  |       |  
|Selling and marketing                                   |  |                     | 16.5 |                 |   | 19.3     |   |             | (2.8  | ) |  | -14.5 | %
|General administrative                                  |  |                     | 9.1  |                 |   | 9.0      |   |             | 0.1   |   |  | 1.1   | %
|Research and development                                |  |                     | 4.2  |                 |   | 4.1      |   |             | 0.1   |   |  | 2.4   | %
|Total operating expenses                                |  |                     | 29.8 |                 |   | 32.4     |   |             | (2.6  | ) |  | -8.0  | %
|                                                        |  |                     |      |                 |   |          |   |             |       |   |  |       |  
|Income from operations                                  |  |                     | 4.8  |                 |   | 14.8     |   |             | (10.0 | ) |  | -67.6 | %
|                                                        |  |                     |      |                 |   |          |   |             |       |   |  |       |  
|Interest expense                                        |  |                     | (0.6 | )               |   | (0.2     | ) |             | (0.4  | ) |  | 200.0 | %
|Interest income                                         |  |                     | 0.1  |                 |   | 1.1      |   |             | (1.0  | ) |  | -90.9 | %
|Other income (expense), net                             |  |                     | 0.1  |                 |   | (0.4     | ) |             | 0.5   |   |  | NM    |  
|Income before income taxes
 and discontinued operations |  |                     | 4.4  |                 |   | 15.3     |   |             | (10.9 | ) |  | -71.2 | %
|Provision for income taxes                              |  |                     | 1.3  |                 |   | 4.3      |   |             | (3.0  | ) |  | -69.8 | %
|Income before discontinued
 operations                  |  |                     | 3.1  |                 |   | 11.0     |   |             | (7.9  | ) |  | -71.8 | %
|                                                        |  |                     |      |                 |   |          |   |             |       |   |  |       |  
|Income from discontinued
 operations, net of tax        |  |                     |     |                 |   | 1.8      |   |             | (1.8  | ) |  | NM    |  
|Net income                                              |  | $                   | 3.1  |                 | $ | 12.8     |   | $           | (9.7  | ) |  | -75.8 | %
|Diluted earnings per share                              |  | $                   | 0.19 |                 | $ | 0.74     |   |             | (0.55 | ) |  | -74.3 | %

NM
represents comparisons that are not meaningful to this analysis.

22

---



Table of Contents

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 results of operations, separately identifying the impact of the SANS acquisition
as well as the impact of currency translation (in millions):

|                               |  |                                      |       |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|------------------------------ |  | ------------------------------------ | ----- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ------------------------------------ | - | ---- | - | - | ---- | -
|                               |  | Three
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Three
 Months
 Ended
 June 27,
 2009 |  
|Revenue                        |  | $                                    | 116.9 |                           | $ | (29.1             | ) | $                     | 6.5  |                                      | $ | (3.5 | ) | $ | 90.8 |  
|Cost of sales                  |  |                                      | 69.7  |                           |   | (13.4             | ) |                       | 3.8  |                                      |   | (3.9 | ) |   | 56.2 |  
|Gross profit                   |  |                                      | 47.2  |                           |   | (15.7             | ) |                       | 2.7  |                                      |   | 0.4  |   |   | 34.6 |  
|                               |  |                                      | 40.4  | %                         |   |                   |   |                       | 41.1 | %                                    |   |      |   |   | 38.1 | %
|Operating expenses:            |  |                                      |       |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|Selling and marketing          |  |                                      | 19.3  |                           |   | (2.8              | ) |                       | 0.8  |                                      |   | (0.8 | ) |   | 16.5 |  
|General administrative         |  |                                      | 9.0   |                           |   | (1.6              | ) |                       | 1.9  |                                      |   | (0.2 | ) |   | 9.1  |  
|Research and development       |  |                                      | 4.1   |                           |   | 0.1               |   |                       |     |                                      |   |     |   |   | 4.2  |  
|Total operating expenses       |  |                                      | 32.4  |                           |   | (4.3              | ) |                       | 2.7  |                                      |   | (1.0 | ) |   | 29.8 |  
|                               |  |                                      |       |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|Income (loss) from
 operations |  | $                                    | 14.8  |                           | $ | (11.4             | ) | $                     |     |                                      | $ | 1.4  |   | $ | 4.8  |  

Revenue was $90.8
million, a decrease of $26.1 million, or 22.3%, compared to revenue of $116.9
million for the Third Quarter of Fiscal 2008. This decrease was primarily due
to lower worldwide volume in the organic Test business and Sensors segment and
an estimated $3.5 million unfavorable impact of currency translation, partially
offset by $6.5 million from SANS. Revenue from international customers
represented 65.3% of total revenue, compared to 63.1% for the Third Quarter of
Fiscal 2008.

Gross profit was
$34.6 million, a decrease of $12.6 million, or 26.7%, compared to gross profit
of $47.2 million for the Third Quarter of Fiscal 2008. Gross profit as a
percentage of revenue was 38.1%, a decrease of 2.3 percentage points from 40.4%
for the Third Quarter of Fiscal 2008. This decrease was primarily due to the
volume decline in both the organic Test business and the Sensors segment, as
well as $0.5 million severance and benefit costs associated with an additional
workforce reduction that was approved by the Company in the Third Quarter of
Fiscal 2009. In addition, SANS positively impacted gross profit by 0.2
percentage points in the Third Quarter of Fiscal 2009.

Selling and marketing expense
was $16.5 million, a decrease of $2.8 million, or 14.5%, compared to $19.3
million for the Third Quarter of Fiscal 2008. This decrease was primarily due
to lower compensation and benefits, resulting from a reduction in employees,
lower commissions and sales incentives, and reduced discretionary spending in
both the organic Test business and the Sensors segment. These decreases were
partially offset by a $0.8 million increase from SANS, as well as $0.3 million
severance and benefit costs associated with the previously mentioned workforce
reduction. Selling and marketing expense as a percentage of revenue for the
Third Quarter of Fiscal 2009 was 18.2%, compared to 16.5% for the Third Quarter
of Fiscal 2008.

General and administrative expense
was $9.1 million, relatively flat compared to the Third Quarter of Fiscal 2008,
as a $1.9 million increase from SANS and $0.3 million severance and benefits
costs with the previously mentioned workforce reduction was substantially
offset by lower compensation and benefits, resulting from a reduction in
employees, and reduced discretionary spending in both organic Test business and
Sensors segment. General and administrative expense as a percentage of revenue
was 10.0%, compared to 7.7% for the Third Quarter of Fiscal 2008.

Research and development expense
was $4.2 million, relatively flat compared to the Third Quarter of Fiscal 2008.
Research and development expense as a percentage of revenue was 4.6%, compared
to 3.5% for the Third Quarter of Fiscal 2008.

Income from operations
was $4.8 million, a decrease of $10.0 million, or 67.6%, compared to income
from operations of $14.8 million for the Third Quarter of Fiscal 2008, as the
unfavorable impact of the volume decline in the organic Test business and
Sensors segment, as well as severance and benefit costs associated with the
previously mentioned workforce reduction, more than offset reduced operating
expenses in both the organic Test business and the Sensors segment. Operating
income as a percentage of revenue was 5.3%, compared to 12.7% for the Third
Quarter of Fiscal 2008.

23

---



Table of Contents

Interest expensewas
$0.6 million, an increase of $0.4 million compared to $0.2 million for the
Third Quarter of Fiscal 2008, as the interest expense incurred on the higher
level of short-term borrowings was partially offset by a reduction in
fixed-rate long-term debt.

Interest income was
$0.1 million, a decrease of $1.0 million compared to $1.1 million for the Third
Quarter of Fiscal 2008, due to lower interest rates, primarily in Europe,
applied to lower average cash and cash equivalent balances compared to the
Third Quarter of Fiscal 2008.

Other income (expense), net
was $0.1 million of net other income, an increase of $0.5 million compared to
$0.4 million of net other expense in the Third Quarter of Fiscal 2008. This
increase was primarily due to net gains on foreign currency transactions
compared to net losses on foreign currency transactions in the Third Quarter of
Fiscal 2008.

Provision for income taxes
totaled $1.3 million for the Third Quarter of Fiscal 2009, a decrease of $3.0
million, or 69.8%, compared to $4.3 million for the Third Quarter of Fiscal
2008, primarily due to decreased income before income taxes and discontinued
operations. The effective tax rate for the Third Quarter of Fiscal 2009 was
29.9%, an increase of 1.6 percentage points compared to a tax rate of 28.3% for
the Third Quarter of Fiscal 2008.

Net income was $3.1
million, a decrease of $9.7 million, or 75.8%, compared to $12.8 million for
the Third Quarter of Fiscal 2008. The decrease was primarily driven by lower
income from operations and unfavorable net interest, partially offset by
decreased income tax expense. In addition, in the Third Quarter of Fiscal 2008,
the Company sold substantially all of the net assets of its Nano Instruments
product line, which resulted in the recognition of a net gain from discontinued
operations of $1.8 million.

Segment Results

|            
|------------
|Test Segment

Orders and Backlog

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 orders for the Test segment, separately identifying the impact of the SANS
acquisition as well as the impact of currency translation (in millions):

|       |  |                                      |      |                           |   |                   |   |                       |     |                                      |   |      |   |   |      | 
|------ |  | ------------------------------------ | ---- | ------------------------- | - | ----------------- | - | --------------------- | --- | ------------------------------------ | - | ---- | - | - | ---- | 
|       |  | Three
 Months
 Ended
 June 28,
 2008 |      | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |     | Three
 Months
 Ended
 June 27,
 2009 |  
|Orders |  | $                                    | 91.9 |                           | $ | (30.2             | ) | $                     | 6.1 |                                      | $ | (2.3 | ) | $ | 65.5 | 

Orders totaled $65.5
million, a decrease of $26.4 million, or 28.7%, compared to orders of $91.9
million for the Third Quarter of Fiscal 2008, primarily due to lower volume in
the organic business across all geographies resulting from sharply lower demand
in worldwide industrial capital spending in the segments markets, partially
offset by $6.1 million from SANS. Third Quarter of Fiscal 2008 orders included
one large order, in excess of $5 million, totaling approximately $10 million.
There were no such large orders in the Third Quarter of Fiscal 2009. The Test
segment accounted for 81.2% of total Company orders, compared to 78.7% for the
Third Quarter of Fiscal 2008. Orders from international customers represented
72.4% of total orders, compared to 57.7% for the Third Quarter of Fiscal 2008.

Backlog of
undelivered orders at the end of the quarter was $152.9 million, a decrease of
8.1% from backlog of $166.3 million at March 28, 2009. Backlog included $12.3
million from SANS. Backlog at the end of the Third Quarter of Fiscal Year 2008
was $229.8 million.

24

---



Table of Contents

Results of Operations

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 results of operations for the Test segment, separately identifying the
impact of the SANS acquisition as well as the impact of currency translation
(in millions):

|                               |  |                                      |      |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|------------------------------ |  | ------------------------------------ | ---- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ------------------------------------ | - | ---- | - | - | ---- | -
|                               |  | Three
 Months
 Ended
 June 28,
 2008 |      | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Three
 Months
 Ended
 June 27,
 2009 |  
|Revenue                        |  | $                                    | 92.4 |                           | $ | (19.7             | ) | $                     | 6.5  |                                      | $ | (2.7 | ) | $ | 76.5 |  
|Cost of sales                  |  |                                      | 58.8 |                           |   | (9.5              | ) |                       | 3.8  |                                      |   | (3.5 | ) |   | 49.6 |  
|Gross profit                   |  |                                      | 33.6 |                           |   | (10.2             | ) |                       | 2.7  |                                      |   | 0.8  |   |   | 26.9 |  
|                               |  |                                      | 36.3 | %                         |   |                   |   |                       | 41.1 | %                                    |   |      |   |   | 35.2 | %
|Operating expenses:            |  |                                      |      |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|Selling and marketing          |  |                                      | 14.6 |                           |   | (1.7              | ) |                       | 0.8  |                                      |   | (0.6 | ) |   | 13.1 |  
|General administrative         |  |                                      | 5.9  |                           |   | (1.0              | ) |                       | 1.9  |                                      |   | (0.1 | ) |   | 6.7  |  
|Research and development       |  |                                      | 2.8  |                           |   | 0.2               |   |                       |     |                                      |   |     |   |   | 3.0  |  
|Total operating expenses       |  |                                      | 23.3 |                           |   | (2.5              | ) |                       | 2.7  |                                      |   | (0.7 | ) |   | 22.8 |  
|                               |  |                                      |      |                           |   |                   |   |                       |      |                                      |   |      |   |   |      |  
|Income (loss) from
 operations |  | $                                    | 10.3 |                           | $ | (7.7              | ) | $                     |     |                                      | $ | 1.5  |   | $ | 4.1  |  

Revenue was $76.5
million, a decrease of $15.9 million, or 17.2%, compared to revenue of $92.4
million for the Third Quarter of Fiscal 2008. The decrease was primarily due to
a lower opening backlog and reduced worldwide demand in the organic business
and an estimated $2.7 million unfavorable impact of currency translation,
partially offset by $6.5 million from SANS. Revenue from international
customers represented 63.9% of total revenue, compared to 60.1% for the Third
Quarter of Fiscal 2008.

Gross profit was
$26.9 million, a decrease of $6.7 million, or 19.9%, compared to gross profit
of $33.6 million for the Third Quarter of Fiscal 2008. Gross profit as a
percentage of revenue was 35.2%, a decrease of 1.1 percentage points from 36.3%
for the Third Quarter of Fiscal 2008. The organic business decreased 1.7
percentage points, primarily due to lower volume and $0.4 million severance and
benefit costs associated with the previously mentioned workforce reduction. In
addition, SANS positively impacted gross profit by 0.6 percentage points in the
quarter.

Selling and marketing expense
was $13.1 million, a decrease of $1.5 million, or 10.3%, compared to $14.6
million for the Third Quarter of Fiscal 2008. This decrease was primarily due
to lower compensation and benefits, resulting from a reduction in employees,
lower commissions and sales incentives, and reduced discretionary spending in
the organic business, partially offset by a $0.8 million increase from SANS, as
well as $0.3 million severance and benefit costs associated with the previously
mentioned workforce reduction. Selling and marketing expense as a percentage of
revenue was 17.1%, compared to 15.8% for the Third Quarter of Fiscal 2008.

General and administrative expense
was $6.7 million, an increase of $0.8 million, or 13.6%, compared to $5.9
million for the Third Quarter of Fiscal 2008. This increase was primarily due
to $1.9 million from SANS and $0.3 million severance and benefits costs with
the previously mentioned workforce reduction, partially offset by lower
compensation and benefits, resulting from a reduction in employees, and reduced
discretionary spending in the organic business. General and administrative
expense as a percentage of revenue was 8.8%, compared to 6.4% for the Third
Quarter of Fiscal 2008.

Research and development expense
was $3.0 million, relatively flat compared to the Third Quarter of Fiscal 2008.
Research and development expense as a percentage of revenue was 3.9%, compared
to 3.0% for the Third Quarter of Fiscal 2008.

25

---



Table of Contents

Income from operations
was $4.1 million, a decrease of $6.2 million, or 60.2%, compared to income from
operations of $10.3 million for the Third Quarter of Fiscal 2008. The decrease
was primarily due to the volume decline in the organic  business, as
well as severance and benefit costs associated with the previously mentioned
workforce reduction, partially offset reduced operating expenses in the organic
business. SANS broke even during the Third Quarter of Fiscal 2009. Operating
income as a percentage of revenue was 5.4%, compared to 11.1% for the Third
Quarter of Fiscal 2008.

SANS Acquisition

Orders and
revenue were $6.1 million and $6.5 million, respectively. Gross profit as a
percentage of revenue was 41.1%. Gross profit includes a $0.4 million expense
associated with the sale of inventory that was written up to fair value as part
of the acquisition, which negatively impacted the gross margin rate by 5.9
percentage points. SANS broke even during the Third Quarter of Fiscal 2009.

|               
|---------------
|Sensors Segment

Orders and Backlog

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 orders for the Sensors segment, separately identifying the impact of
currency translation (in millions):

|       |  |                                      |      |                           |   |                       |   |                                      |      |   |   |      | 
|------ |  | ------------------------------------ | ---- | ------------------------- | - | --------------------- | - | ------------------------------------ | ---- | - | - | ---- | 
|       |  | Three
 Months
 Ended
 June 28,
 2008 |      | Organic
 Business
 Change |   | Currency
 Translation |   | Three
 Months
 Ended
 June 27,
 2009 |     
|Orders |  | $                                    | 24.8 |                           | $ | (9.2                  | ) | $                                    | (0.4 | ) | $ | 15.2 | 

Orders totaled $15.2
million, a decrease of $9.6 million, or 38.7%, compared to orders of $24.8
million for the Third Quarter of Fiscal 2008, primarily due to lower volume
across all geographies resulting from continued weakness in worldwide
industrial capital spending. The Sensors segment accounted for 18.8% of total
Company orders, compared to 21.3% for the Third Quarter of Fiscal 2008. Orders
from international customers represented 72.2% of total orders, compared to
75.2% for the Third Quarter of Fiscal 2008.

Backlog of
undelivered orders at the end of the quarter was $10.4 million, an increase of
14.3% from backlog of $9.1 million at March 28, 2009. Backlog at the end of the
Third Quarter of Fiscal Year 2008 was $13.0 million.

Results of Operations

Third Quarter of Fiscal 2009 Compared to
Third Quarter of Fiscal 2008

The following
is a comparison of Third Quarter of Fiscal 2009 and Third Quarter of Fiscal
2008 results of operations for the Sensors segment, separately identifying the
impact of currency translation (in millions):

26

---



Table of Contents

|                               |  |                                      |      |                           |   |                       |   |                                      |      |   |   |      |  
|------------------------------ |  | ------------------------------------ | ---- | ------------------------- | - | --------------------- | - | ------------------------------------ | ---- | - | - | ---- | -
|                               |  | Three
 Months
 Ended
 June 28,
 2008 |      | Organic
 Business
 Change |   | Currency
 Translation |   | Three
 Months
 Ended
 June 27,
 2009 |     
|Revenue                        |  | $                                    | 24.5 |                           | $ | (9.4                  | ) | $                                    | (0.8 | ) | $ | 14.3 |  
|Cost of sales                  |  |                                      | 10.9 |                           |   | (3.9                  | ) |                                      | (0.4 | ) |   | 6.6  |  
|Gross profit                   |  |                                      | 13.6 |                           |   | (5.5                  | ) |                                      | (0.4 | ) |   | 7.7  |  
|                               |  |                                      | 55.8 | %                         |   |                       |   |                                      |      |   |   | 54.0 | %
|Operating expenses:            |  |                                      |      |                           |   |                       |   |                                      |      |   |   |      |  
|Selling and marketing          |  |                                      | 4.7  |                           |   | (1.1                  | ) |                                      | (0.2 | ) |   | 3.4  |  
|General administrative         |  |                                      | 3.1  |                           |   | (0.6                  | ) |                                      | (0.1 | ) |   | 2.4  |  
|Research and development       |  |                                      | 1.3  |                           |   | (0.1                  | ) |                                      |     |   |   | 1.2  |  
|Total operating expenses       |  |                                      | 9.1  |                           |   | (1.8                  | ) |                                      | (0.3 | ) |   | 7.0  |  
|                               |  |                                      |      |                           |   |                       |   |                                      |      |   |   |      |  
|Income (loss) from
 operations |  | $                                    | 4.5  |                           | $ | (3.7                  | ) | $                                    | (0.1 | ) | $ | 0.7  |  

Revenue was $14.3
million, a decrease of $10.2 million, or 41.6%, compared to revenue of $24.5
million for the Third Quarter of Fiscal 2008. This decrease was primarily
driven by reduced worldwide volume. Revenue from international customers
represented 73.0% of total revenue, compared to 74.5% for the Third Quarter of
Fiscal 2008.

Gross profit was
$7.7 million, a decrease of $5.9 million, or 43.4%, compared to gross profit of
$13.6 million for the Third Quarter of Fiscal 2008. Gross profit as a
percentage of revenue was 54.0%, a decrease of 1.8 percentage points from 55.8%
for the Third Quarter of Fiscal 2008. This decrease was primarily due to
reduced volume and $0.2 million severance and benefit costs associated with the
previously mentioned workforce reduction.

Selling and marketing expense
was $3.4 million, a decrease of $1.3 million, or 27.7%, compared to $4.7 million
for the Third Quarter of Fiscal 2008. The decrease is primarily due to reduced
discretionary spending and lower commission expense. Selling and marketing
expense as a percentage of revenue was 23.8%, compared to 19.2% for the Third
Quarter of Fiscal 2008.

General and administrative expense
was $2.4 million, a decrease of $0.7 million, or 22.6%, compared to $3.1
million for the Third Quarter of Fiscal 2008, primarily due to reduced
compensation and benefits expense, including $0.2 million reduction in variable
compensation. General and administrative expense as a percentage of revenue was
16.8%, compared to 12.7% for the Second Quarter of Fiscal 2008.

Research and development expense
was $1.2 million, relatively flat compared to $1.3 million for the Third
Quarter of Fiscal 2008. The decrease was due to reduced spending. Research and
development expense as a percentage of revenue was 8.4%, compared to 5.3% for
the Third Quarter of Fiscal 2008.

Income from operations
was $0.7 million, a decrease of $3.8 million, or 84.4%, compared to income from
operations of $4.5 million for the Third Quarter of Fiscal 2008, primarily due
to lower gross profit, partially offset by reduced operating expenses.
Operating income as a percentage of revenue was 4.9%, compared to 18.4% for the
Third Quarter of Fiscal 2008.

|             
|-------------
|Total Company

Orders and Backlog

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 orders, separately identifying the impact of the SANS acquisition
as well as the impact of currency translation (in millions):

27

---



Table of Contents

|       |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |      |   |   |       | 
|------ |  | ----------------------------------- | ----- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ----------------------------------- | - | ---- | - | - | ----- | 
|       |  | Nine
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Nine
 Months
 Ended
 June 27,
 2009 |  
|Orders |  | $                                   | 370.1 |                           | $ | (135.0            | ) | $                     | 18.1 |                                     | $ | (7.9 | ) | $ | 245.3 | 

Orders totaled
$245.3 million, a decrease of $124.8 million, or 33.7%, compared to orders of
$370.1 million for the First Nine Months of Fiscal 2008. This decrease is
primarily due to lower order volume in both the organic Test business and
Sensors segment across all geographies resulting from sharply lower demand in
worldwide industrial capital spending, partially offset by an $18.1 million
increase from SANS. Orders from international customers represented 68.2% of
total orders, compared to 62.9% for the First Nine Months of Fiscal 2008.

Backlog of
undelivered orders at the end of the Third Quarter of Fiscal 2009, was $163.3
million, a decrease of 30.4% from backlog of $234.7 million at September 27,
2008. Backlog included $12.3 million from SANS. Backlog at the end of the Third
Quarter of Fiscal 2008 was $242.8 million. During the First Nine Months of
Fiscal 2009, the Company experienced one order cancellation in the Test segment
approximating $3.0 million. The Company seldom experiences order cancellations
larger than $1.0 million however, current economic conditions could have an
adverse impact on order cancellations in the future.

Results of Operations

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 statements of operations (in millions, except per share data):

|                                                       |  |                    |       |                 |   |          |   |             |       |   |  |       |  
|------------------------------------------------------ |  | ------------------ | ----- | --------------- | - | -------- | - | ----------- | ----- | - |  | ----- | -
|                                                       |  | Nine
 Months Ended |       |                 |   |          |  
|                                                       |  | June
 27,
 2009    |       | June
 28,
 2008 |   | Variance |   | %
 Variance |      
|Revenue                                                |  | $                  | 315.0 |                 | $ | 336.4    |   | $           | (21.4 | ) |  | -6.4  | %
|Cost of sales                                          |  |                    | 194.7 |                 |   | 199.9    |   |             | (5.2  | ) |  | -2.6  | %
|Gross profit                                           |  |                    | 120.3 |                 |   | 136.5    |   |             | (16.2 | ) |  | -11.9 | %
|Gross margin                                           |  |                    | 38.2  | %               |   | 40.6     | % |             | -2.4  | % |  |       |  
|                                                      
|Operating expenses:                                    |  |                    |       |                 |   |          |   |             |       |   |  |       |  
|Selling and marketing                                  |  |                    | 53.5  |                 |   | 58.0     |   |             | (4.5  | ) |  | -7.8  | %
|General administrative                                 |  |                    | 27.0  |                 |   | 25.6     |   |             | 1.4   |   |  | 5.5   | %
|Research and development                               |  |                    | 11.3  |                 |   | 12.2     |   |             | (0.9  | ) |  | -7.4  | %
|Total operating expenses                               |  |                    | 91.8  |                 |   | 95.8     |   |             | (4.0  | ) |  | -4.2  | %
|                                                       |  |                    |       |                 |   |          |   |             |       |   |  |       |  
|Income from operations                                 |  |                    | 28.5  |                 |   | 40.7     |   |             | (12.2 | ) |  | -30.0 | %
|                                                       |  |                    |       |                 |   |          |   |             |       |   |  |       |  
|Interest expense                                       |  |                    | (1.6  | )               |   | (0.8     | ) |             | (0.8  | ) |  | 100.0 | %
|Interest income                                        |  |                    | 0.9   |                 |   | 3.0      |   |             | (2.1  | ) |  | -70.0 | %
|Other (expense) income, net                            |  |                    | (0.1  | )               |   | 0.4      |   |             | (0.5  | ) |  | NM    |  
|Income before income taxes and discontinued operations |  |                    | 27.7  |                 |   | 43.3     |   |             | (15.6 | ) |  | -36.0 | %
|Provision for income taxes                             |  |                    | 7.3   |                 |   | 10.7     |   |             | (3.4  | ) |  | -31.8 | %
|Income before discontinued operations                  |  |                    | 20.4  |                 |   | 32.6     |   |             | (12.2 | ) |  | -37.4 | %
|                                                       |  |                    |       |                 |   |          |   |             |       |   |  |       |  
|Income from discontinued operations, net of tax        |  |                    |      |                 |   | 2.0      |   |             | (2.0  | ) |  | NM    |  
|Net income                                             |  | $                  | 20.4  |                 | $ | 34.6     |   | $           | (14.2 | ) |  | -41.0 | %
|Diluted earnings per share                             |  | $                  | 1.21  |                 | $ | 1.96     |   | $           | (0.75 | ) |  | -38.3 | %

NM
represents comparisons that are not meaningful to this analysis.

28

---



Table of Contents

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 results of operations, separately identifying the impact of the
SANS acquisition as well as the impact of currency translation (in millions):

|                               |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |       |   |   |       |  
|------------------------------ |  | ----------------------------------- | ----- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ----------------------------------- | - | ----- | - | - | ----- | -
|                               |  | Nine
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Nine
 Months
 Ended
 June 27,
 2009 |  
|Revenue                        |  | $                                   | 336.4 |                           | $ | (25.4             | ) | $                     | 14.4 |                                     | $ | (10.4 | ) | $ | 315.0 |  
|Cost of sales                  |  |                                     | 199.9 |                           |   | (5.9              | ) |                       | 9.1  |                                     |   | (8.4  | ) |   | 194.7 |  
|Gross profit                   |  |                                     | 136.5 |                           |   | (19.5             | ) |                       | 5.3  |                                     |   | (2.0  | ) |   | 120.3 |  
|                               |  |                                     | 40.6  | %                         |   |                   |   |                       | 36.8 | %                                   |   |       |   |   | 38.2  | %
|Operating expenses:            |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |       |   |   |       |  
|Selling and marketing          |  |                                     | 58.0  |                           |   | (5.6              | ) |                       | 2.9  |                                     |   | (1.8  | ) |   | 53.5  |  
|General administrative         |  |                                     | 25.6  |                           |   | (4.1              | ) |                       | 5.9  |                                     |   | (0.4  | ) |   | 27.0  |  
|Research and development       |  |                                     | 12.2  |                           |   | (0.8              | ) |                       |     |                                     |   | (0.1  | ) |   | 11.3  |  
|Total operating expenses       |  |                                     | 95.8  |                           |   | (10.5             | ) |                       | 8.8  |                                     |   | (2.3  | ) |   | 91.8  |  
|                               |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |       |   |   |       |  
|Income (loss) from
 operations |  | $                                   | 40.7  |                           | $ | (9.0              | ) | $                     | (3.5 | )                                   | $ | 0.3   |   | $ | 28.5  |  

Revenue was $315.0
million, a decrease of $21.4 million, or 6.4%, compared to revenue of $336.4
million for the First Nine Months of Fiscal 2008. This decrease was primarily
due to lower worldwide volume in the organic Test business and Sensors segment
and an estimated $10.4 million unfavorable impact of currency translation,
partially offset by $14.4 million from SANS. Revenue from international
customers represented 64.2% of total revenue, compared to 64.3% for the First
Nine Months of Fiscal 2008.

Gross profit was
$120.3 million, a decrease of $16.2 million, or 11.9%, compared to gross profit
of $136.5 million for the First Nine Months of Fiscal 2008. Gross profit as a
percentage of revenue was 38.2%, a decrease of 2.4 percentage points from 40.6%
for the First Nine Months of Fiscal 2008. This decrease was primarily due to
the volume decline in both the organic Test business and the Sensors segment,
higher warranty expense in the organic Test business and $1.8 million severance
and benefit costs associated with the workforce reduction actions, partially
offset by a $2.2 million reduction in variable compensation. In addition, SANS
negatively impacted gross profit by 0.1 percentage points primarily due to the
sale of inventory that was written up to fair value as part of the acquisition.

Selling and marketing expense
was $53.5 million, a decrease of $4.5 million, or 7.8%, compared to $58.0
million for the First Nine Months of Fiscal 2008. This decrease was primarily
due to lower compensation and benefits, resulting from a reduction in
employees, lower commissions and sales incentives, reduced discretionary spending,
as well as a $0.9 million reduction in variable compensation expense in both
the organic Test business and Sensors segment. These decreases were partially
offset by a $2.9 million increase from SANS, as well as $1.7 million severance
and benefit costs associated with the previously mentioned workforce reduction
actions. Selling and marketing expense as a percentage of revenue was 17.0%,
compared to 17.2% for the First Nine Months of Fiscal 2008.

General and administrative expense
was $27.0 million, an increase of $1.4 million, or 5.5%, compared to $25.6
million for the First Nine Months of Fiscal 2008. This increase was primarily
driven by SANS, and $0.5 million severance and benefit costs associated with
the previously mentioned workforce reduction actions, partially offset by lower
legal expense in organic Test business, decreased compensation and benefits
resulting from a reduction in employees, reduced discretionary spending and a
$1.7 million reduction in variable compensation expense. General and
administrative expense as a percentage of revenue was 8.6%, compared to 7.6%
for the First Nine Months of Fiscal 2008.

Research and development expense
was $11.3 million, a decrease of $0.9 million, or 7.4%, compared to $12.2
million for the First Nine Months of Fiscal 2008. The decrease was due to a
planned spending reduction in the Sensors segment. Research and development
expense as a percentage of revenue was 3.6%, flat compared to the First Nine
Months of Fiscal 2008.

29

---



Table of Contents

Income from operations
was $28.5 million, a decrease of $12.2 million, or 30.0%, compared to income
from operations of $40.7 million for the First Nine Months of Fiscal 2008, as
lower gross profit in the both the organic Test business and the Sensors
segment, severance and benefit costs associated with the previously mentioned
workforce reduction actions, as well as a $3.5 million operating loss from
SANS, more than offset reduced variable compensation and other operating
expenses in both the organic Test business and Sensors segment. Operating
income as a percentage of revenue was 9.0%, compared to 12.1% for the First
Nine Months of Fiscal 2008.

Interest expensewas
$1.6 million, an increase of $0.8 million compared to $0.8 million for the
First Nine Months of Fiscal 2008, as the interest expense incurred on the
higher level of short-term borrowings was partially offset by a reduction in
fixed-rate long-term debt.

Interest income was
$0.9 million, a decrease of $2.1 million compared to $3.0 million for the First
Nine Months of Fiscal 2008, due to lower interest rates, primarily in Europe,
applied to lower average cash and cash equivalent balances compared to the
First Nine Months of Fiscal 2008.

Other (expense) income, net
was $0.1 million of net other expense, a decrease of $0.5 million compared to
$0.4 million of net other income in the First Nine Months of Fiscal 2008. This
decrease was primarily due to net losses on foreign currency transactions
compared to net gains on foreign currency transactions in the First Nine Months
of Fiscal 2008.

Provision for income taxes
totaled $7.3 million, a decrease of $3.4 million, or 31.8%, compared to $10.7
million for the First Nine Months of Fiscal 2008, primarily due to decreased
income before income taxes and discontinued operations, partially offset by a
higher effective tax rate. The effective tax rate for the First Nine Months of
Fiscal 2009 was 26.5%, an increase of 1.8 percentage points compared to a tax
rate of 24.7% for the First Nine Months of Fiscal 2008. This increase was primarily
due to a $3.7 million tax benefit from the repatriation of earnings from
Japanese affiliates and the successful closure of foreign tax audits in the
First Nine Months of Fiscal 2008, partially offset by a $1.0 million tax
benefit from the retroactive extension of U.S. R&D credits in the current
fiscal year.

Net income was $20.4
million, a decrease of $14.2 million, or 41.0%, compared to $34.6 million for
the First Nine Months of Fiscal 2008. The decrease in net income was primarily
driven by lower income from operations, unfavorable net interest, losses on
foreign currency transactions, and a higher effective tax rate. In addition, in
the First Nine Months of Fiscal 2008, the Company sold substantially all of the
net assets of its Nano Instruments product line, which resulted in the
recognition of a net gain from discontinued operations of $2.0 million.

The reduction
in number of shares outstanding, resulting from the Companys share purchases,
positively impacted earnings per share by $0.06.

Segment Results

|            
|------------
|Test Segment

Orders and Backlog

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 orders for the Test segment, separately identifying the impact of
the SANS acquisition as well as the impact of currency translation (in
millions):

|       |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |      |   |   |       | 
|------ |  | ----------------------------------- | ----- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ----------------------------------- | - | ---- | - | - | ----- | 
|       |  | Nine
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Nine
 Months
 Ended
 June 27,
 2009 |  
|Orders |  | $                                   | 297.9 |                           | $ | (113.8            | ) | $                     | 18.1 |                                     | $ | (6.2 | ) | $ | 196.0 | 

Orders totaled
$196.0 million, a decrease of $101.9 million, or 34.2%, compared to orders of
$297.9 million for the First Nine Months of Fiscal 2008, primarily due to lower
volume in the organic business across all geographies, resulting from sharply
lower demand in worldwide industrial capital spending in the segments markets,
and an estimated $6.2 million unfavorable impact of currency translation,
partially offset by $18.1 million from SANS. The First Nine Months of Fiscal
2008 orders included five large orders in excess of $5 million totaling
approximately $47 million. There were no such large orders
in the First Half of Fiscal 2009. The Test segment accounted for 79.9% of total
Company orders, compared to 80.5% for the First Nine Months of Fiscal 2008.
Orders from international customers represented 67.8% of total orders, compared
to 60.2% for the First Nine Months of Fiscal 2008.

30

---



Table of Contents

Backlog of
undelivered orders at the end of the Third Quarter of Fiscal 2009 was $152.9
million, a decrease of 31.4% from backlog of $222.8 million at September 27,
2008. Backlog included $12.3 million from SANS. Backlog at the end of the Third
Quarter of Fiscal Year 2008 was $229.8 million.

Results of Operations

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 results of operations for the Test segment, separately identifying
the impact of the SANS acquisition as well as the impact of currency
translation (in millions):

|                               |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |      |   |   |       |  
|------------------------------ |  | ----------------------------------- | ----- | ------------------------- | - | ----------------- | - | --------------------- | ---- | ----------------------------------- | - | ---- | - | - | ----- | -
|                               |  | Nine
 Months
 Ended
 June 28,
 2008 |       | Organic
 Business
 Change |   | SANS
 Acquisition |   | Currency
 Translation |      | Nine
 Months
 Ended
 June 27,
 2009 |  
|Revenue                        |  | $                                   | 264.4 |                           | $ | (6.1              | ) | $                     | 14.4 |                                     | $ | (8.1 | ) | $ | 264.6 |  
|Cost of sales                  |  |                                     | 168.5 |                           |   | 1.8               |   |                       | 9.1  |                                     |   | (7.4 | ) |   | 172.0 |  
|Gross profit                   |  |                                     | 95.9  |                           |   | (7.9              | ) |                       | 5.3  |                                     |   | (0.7 | ) |   | 92.6  |  
|                               |  |                                     | 36.3  | %                         |   |                   |   |                       | 36.8 | %                                   |   |      |   |   | 35.0  | %
|Operating expenses:            |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |      |   |   |       |  
|Selling and marketing          |  |                                     | 44.8  |                           |   | (4.2              | ) |                       | 2.9  |                                     |   | (1.4 | ) |   | 42.1  |  
|General administrative         |  |                                     | 17.2  |                           |   | (2.9              | ) |                       | 5.9  |                                     |   | (0.2 | ) |   | 20.0  |  
|Research and development       |  |                                     | 8.3   |                           |   | (0.2              | ) |                       |     |                                     |   |     |   |   | 8.1   |  
|Total operating expenses       |  |                                     | 70.3  |                           |   | (7.3              | ) |                       | 8.8  |                                     |   | (1.6 | ) |   | 70.2  |  
|                               |  |                                     |       |                           |   |                   |   |                       |      |                                     |   |      |   |   |       |  
|Income (loss) from
 operations |  | $                                   | 25.6  |                           | $ | (0.6              | ) | $                     | (3.5 | )                                   | $ | 0.9  |   | $ | 22.4  |  

Revenue was $264.6
million, relatively flat compared to the First Nine Months of Fiscal 2008, as
the $14.4 million from SANS was substantially offset by lower volume in the
organic business in the Americas and Asia, as well as an estimated $8.1 million
unfavorable impact of currency translation. Revenue from international
customers represented 62.8% of total revenue, compared to 61.8% for the First
Nine Months of Fiscal 2008.

Gross profit was
$92.6 million, a decrease of $3.3 million, or 3.4%, compared to gross profit of
$95.9 million for the First Nine Months of Fiscal 2008. Gross profit as a
percentage of revenue was 35.0%, a decrease of 1.3 percentage points from 36.3%
for the First Nine Months of Fiscal 2008. This decrease was primarily due to
the volume decline and higher warranty expense in the organic business and $1.5
million severance and benefit costs associated with the workforce reduction
actions, partially offset by a $2.0 million reduction in variable compensation.

Selling and marketing expense
was $42.1 million, a decrease of $2.7 million, or 6.0%, compared to $44.8
million for the First Nine Months of Fiscal 2008. This decrease was primarily
due to lower compensation and benefits, resulting from a reduction in
employees, lower commissions and sales incentives, reduced discretionary
spending, as well as a $0.6 million reduction in variable compensation expense
in the organic business. These decreases were partially offset by $2.9 million
increase from SANS, as well as $1.7 million severance and benefit costs
associated with the previously mentioned workforce reduction actions. Selling
and marketing expense as a percentage of revenue was 15.9%, compared to 16.9%
for the First Nine Months of Fiscal 2008.

General and administrative expense
was $20.0 million, an increase of $2.8 million, or 16.3%, compared to $17.2
million for the First Nine Months of Fiscal 2008. This increase was primarily
driven by SANS, and $0.5 million severance and benefit costs associated with
the previously mentioned workforce reduction actions, partially offset by lower
legal expense in organic business, decreased compensation and benefits
resulting from a reduction in employees, reduced discretionary spending and a
$1.3 million reduction in variable compensation. General and administrative
expense as a percentage of revenue was 7.6%, compared to 6.5% for the First
Nine Months of Fiscal 2008.

31

---



Table of Contents

Research and development expense
was $8.1 million, relatively flat compared to the First Nine Months of Fiscal
2008. Research and development expense as a percentage of revenue was 3.1%,
flat compared to the First Nine Months of Fiscal 2008.

Income from operations
was $22.4 million, a decrease of $3.2 million, or 12.5%, compared to income
from operations of $25.6 million for the First Nine Months of Fiscal 2008. This
decrease was primarily due to lower gross profit in the organic business,
severance and benefit costs associated with the previously mentioned workforce
reduction actions, as well as a $3.5 million operating loss from SANS,
partially offset by reduced variable compensation and other operating expenses
in the organic business. Operating income as a percentage of revenue was 8.5%,
compared to 9.7% for the First Nine Months of Fiscal 2008.

SANS Acquisition

Orders and
revenue were $18.1 million and $14.4 million, respectively. Gross profit as a
percentage of revenue was 36.8%. Gross profit includes a $1.7 million expense
associated with the sale of inventory that was written up to fair value as part
of the acquisition, which negatively impacted the gross margin rate by 11.9
percentage points. The loss from operations was $3.5 million, driven by the
negative impact on gross profit and operating expenses associated with
acquisition and integration costs.

|               
|---------------
|Sensors Segment

Orders and Backlog

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 orders for the Sensors segment, separately identifying the impact
of currency translation (in millions):

|       |  |              |      |          |   |             |   |              |      |   |   |      | 
|------ |  | ------------ | ---- | -------- | - | ----------- | - | ------------ | ---- | - | - | ---- | 
|       |  | Nine
 Months |      |          |   |             |   | Nine
 Months |     
|       |  | Ended        |      | Organic  |   |             |   | Ended        |     
|       |  | June
 28,    |      | Business |   | Currency    |   | June
 27,    |     
|       |  | 2008         |      | Change   |   | Translation |   | 2009         |     
|Orders |  | $            | 72.2 |          | $ | (21.2       | ) | $            | (1.7 | ) | $ | 49.3 | 

Orders totaled $49.3
million, a decrease of $22.9 million, or 31.7%, compared to orders of $72.2 million
for the First Nine Months of Fiscal 2008, primarily due to lower volume across
all geographies resulting from sharply lower demand in worldwide industrial
capital spending and a reduction in customer inventory levels. Sensors segment
accounted for 20.1% of total Company orders, compared to 19.5% for the First
Nine Months of Fiscal 2008. Orders from international customers represented
69.7% of total orders, compared to 73.9% for the First Nine Months of Fiscal
2008.

Backlog of
undelivered orders at the end of the Third Quarter of Fiscal 2009 was $10.4
million, a decrease of 12.6% from backlog of $11.9 million at September 27,
2008. Backlog at the end of the Third Quarter of Fiscal Year 2008 was $13.0
million.

Results of Operations

First Nine Months of Fiscal 2009 Compared to
First Nine Months of Fiscal 2008

The following
is a comparison of First Nine Months of Fiscal 2009 and First Nine Months of
Fiscal 2008 results of operations for the Sensors segment, separately
identifying the impact of currency translation (in millions):

32

---



Table of Contents

|                              |  |              |      |          |   |             |   |              |      |   |   |      |  
|----------------------------- |  | ------------ | ---- | -------- | - | ----------- | - | ------------ | ---- | - | - | ---- | -
|                              |  | Nine
 Months |      |          |   |             |   | Nine
 Months |     
|                              |  | Ended        |      | Organic  |   |             |   | Ended        |     
|                              |  | June
 28,    |      | Business |   | Currency    |   | June
 27,    |     
|                              |  | 2008         |      | Change   |   | Translation |   | 2009         |     
|Revenue                       |  | $            | 72.0 |          | $ | (19.3       | ) | $            | (2.3 | ) | $ | 50.4 |  
|Cost of sales                 |  |              | 31.4 |          |   | (7.7        | ) |              | (1.0 | ) |   | 22.7 |  
|Gross profit                  |  |              | 40.6 |          |   | (11.6       | ) |              | (1.3 | ) |   | 27.7 |  
|                              |  |              | 56.3 | %        |   |             |   |              |      |   |   | 54.9 | %
|Operating expenses:           |  |              |      |          |   |             |   |              |      |   |   |      |  
|Selling and marketing         |  |              | 13.2 |          |   | (1.4        | ) |              | (0.4 | ) |   | 11.4 |  
|General administrative        |  |              | 8.4  |          |   | (1.2        | ) |              | (0.2 | ) |   | 7.0  |  
|Research and development      |  |              | 3.9  |          |   | (0.6        | ) |              | (0.1 | ) |   | 3.2  |  
|Total operating expenses      |  |              | 25.5 |          |   | (3.2        | ) |              | (0.7 | ) |   | 21.6 |  
|                              |  |              |      |          |   |             |   |              |      |   |   |      |  
|Income (loss) from operations |  | $            | 15.1 |          | $ | (8.4        | ) | $            | (0.6 | ) | $ | 6.1  |  

Revenue was $50.4
million, a decrease of $21.6 million, or 30.0%, compared to revenue of $72.0
million for the First Nine Months of Fiscal 2008. This decrease was primarily
driven by reduced worldwide volume. Revenue from international customers
represented 71.6% of total revenue, compared to 73.4% for the First Nine Months
of Fiscal 2008.

Gross profit was
$27.7 million, a decrease of $12.9 million, or 31.8%, compared to gross profit
of $40.6 million for the First Nine Months of Fiscal 2008. Gross profit as a
percentage of revenue was 54.9%, a decrease of 1.4 percentage points from 56.3%
for the First Nine Months of Fiscal 2008. This decrease was primarily due to
reduced volume, and $0.2 million severance and benefit costs associated with
the previously mentioned workforce reduction actions, partially offset by a
$0.2 million reduction in variable compensation expense.

Selling and marketing expense
was $11.4 million, a decrease of $1.8 million, or 13.6%, compared to $13.2
million for the First Nine Months of Fiscal 2008. The decrease is primarily due
to reduced discretionary spending, lower commission expense, and a $0.3 million
reduction in variable compensation expense. Selling and marketing expense as a percentage
of revenue was 22.6%, compared to 18.3% for the First Nine Months of Fiscal
2008.

General and administrative expense
was $7.0 million, a decrease of $1.4 million, or 16.7%, compared to $8.4
million for the First Nine Months of Fiscal 2008, primarily due to reduced
compensation and benefits expense, including a $0.4 million reduction in
variable compensation. General and administrative expense as a percentage of
revenue was 13.9%, compared to 11.7% for the First Nine Months of Fiscal 2008.

Research and development expense
was $3.2 million, a decrease of $0.7 million, or 17.9%, compared to $3.9
million for the First Nine Months of Fiscal 2008. The decrease was due to a
planned reduction in spending. Research and development expense as a percentage
of revenue was 6.3%, compared to 5.4% for the First Nine Months of Fiscal 2008.

Income from operations
was $6.1 million, a decrease of $9.0 million, or 59.6%, compared to income from
operations of $15.1 million for the First Nine Months of Fiscal 2008, primarily
due to lower gross profit, partially offset by reduced operating expenses.
Operating income as a percentage of revenue was 12.1%, compared to 21.0% for
the First Nine Months of Fiscal 2008.

Capital Resources and Liquidity

The Company
had cash and cash equivalents of $118.9 million at the end of the Third Quarter
of Fiscal 2009. Of this amount, $16.0 million was located in North America,
$82.0 million in Europe, and $20.9 million in Asia. 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 Third Quarter of Fiscal 2009, the
Company held no short-term investments.

33

---



Table of Contents

Total cash and
cash equivalents increased $4.8 million in the First Nine Months of Fiscal
2009, primarily due to earnings and decreased working capital requirements,
partially offset by employee incentive and related benefit payments, purchases of
company stock, dividend payments, investment in property and equipment, and the
acquisition of SANS. Total cash and cash equivalents increased $15.5 million in
the First Nine Months of Fiscal 2008, primarily due to earnings, net proceeds
generated from the conversion of short-term investments to cash and cash
equivalents, net proceeds received from the sale of the Nano Instruments
product line, and a favorable impact of currency translation, partially offset
by purchases of the Companys common stock, increased working capital
requirements, dividend payments, and investment in property and equipment. The
Company believes that its anticipated operating cash flows, in addition to
funds available from cash, cash equivalents and its credit facility, are
adequate to fund ongoing operations, capital expenditures, dividend payments,
and share purchases, as well as to fund internal growth opportunities or
strategic acquisitions.

Cash flows from operating activities
provided cash totaling $36.9 million for the First Nine Months of Fiscal 2009,
compared to cash provided of $27.2 million for the First Nine Months of Fiscal
2008. Cash provided for the First Nine Months of Fiscal 2009 was primarily due
to earnings and $45.9 million decreased accounts and unbilled receivables
driven by lower order volume. This cash provided was partially offset by $16.1
million decreased accounts payable primarily resulting from overall reduced
spending levels, $16.1 million decrease in advance payments received from
customers driven by decreased orders, and $10.5 million incentive and related
benefit payments. Cash provided for the First Nine Months of Fiscal 2008
primarily resulted from earnings and a $1.7 million increase in advance
payments received from customers, partially offset by $7.2 million increased
accounts and unbilled receivables, $3.4 million increased inventories, and $3.0
million spending on software development activities.

Cash flows from investing activities
required the use of cash totaling $29.6 million for the First Nine Months of
Fiscal 2009, compared to cash provided of $21.9 million for the First Nine
Months of Fiscal 2008. The cash usage for the First Nine Months of 2009 was due
to $21.9 million payments associated with the acquisition of SANS, and $7.7
million investment in property and equipment. The cash provided for the First
Nine Months of 2008 was due to net proceeds from the conversion of short-term
investments to cash and cash equivalents of $17.1 million, and net proceeds
received from the sale of Nano Instruments product line of $11.9 million, partially
offset by a $6.8 million investment in property and equipment.

Cash flows from financing activities
required the use of cash totaling $1.1 million for the First Nine Months of
Fiscal 2009, compared to a use of cash totaling $41.8 million for the First
Nine Months of Fiscal 2008. The cash usage for the First Nine Months of Fiscal
2009 was primarily due to $9.5 million to purchase 371,500 shares of the
Companys common stock, payment of cash dividends of $7.6 million, and
repayment of interest-bearing debt of $1.2 million, partially offset by $15.8
million net proceeds received from short-term borrowings, and $1.3 million
received in connection with stock option exercises. The cash usage for the
First Nine Months of Fiscal 2008 was due to the use of $37.0 million to
purchase 1,010,000 shares of the Companys common stock, payment of cash
dividends of $7.9 million, and repayment of interest-bearing debt of $1.2
million, partially offset by $3.7 million received in connection with stock
option exercises, and $0.7 million equity compensation income tax benefits.

Under the
terms of its borrowing agreements, the Company has agreed to certain financial
covenants. At the end of the Third Quarter of Fiscal 2009, the Company was in
compliance with the financial terms and conditions of those agreements.

Off-Balance Sheet Arrangements

As of June 27,
2009, 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.

34

---



Table of Contents

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, and a certain amount of judgment is required in
determining the appropriate level of inventory valuation reserves. While the
Company expects its sales to grow, a reduction in its sales could reduce the
demand for the Companys products, and additional inventory valuation adjustments
may be required.

Impairment of Long-Lived Assets.
In accordance with SFAS No. 144, Accounting for Impairment or Disposal 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 sale 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.

Business Acquisitions.
The Company accounts for acquired businesses using the purchase method of
accounting, which requires that the assets acquired and liabilities assumed be
recorded at the date of acquisition at their respective fair values. The
judgments made in determining the estimated fair value assigned to each class
of assets acquired and liabilities assumed, as well as asset lives, can
materially impact net income. Determining the useful life of an intangible
asset also requires judgment. For example, different types of intangible assets
will have different useful lives and certain assets may even be considered to
have indefinite useful lives. All of these judgments and estimates can
significantly impact net income.

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 guarantees on sales of its products. 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.

Stock-Based Compensation.
For purposes of determining estimated fair value of stock-based payment awards
on the date of grant in accordance with Statement of Financial Accounting
Standard (SFAS) No. 123R, Share-Based Payment, the Company utilizes a
Black-Scholes option pricing model for estimating the fair value of stock
option grants, which requires the input of certain assumptions requiring
management judgment. Because the Companys employee stock option awards have
characteristics significantly different from those of traded options, and
because changes in the input assumptions can materially affect fair value
estimates, existing models may not provide a reliable single measure of the
fair value of employee stock options. Management will continue to assess the
assumptions and methodologies used to calculate estimated fair value of
stock-based compensation. Circumstances may change and additional data may become
available over time that could result in changes to these assumptions and
methodologies and thereby materially impact the fair value determination. If
factors change and the Company employs different assumptions in the application
of SFAS No. 123R
in future periods, the compensation expense recorded under SFAS No. 123R may
differ significantly from the stock-based compensation expense recorded in the
current period.

35

---



Table of Contents

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.

Recent Accounting Pronouncements

In December
2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS No. 141R), Business
Combinations. SFAS No. 141R expands the definition of a business combination
and requires the fair value of the purchase price of an acquisition, including
the issuance of equity securities, to be determined on the acquisition date.
SFAS No. 141R also requires that all assets, liabilities, contingent
considerations, and contingencies of an acquired business be recorded at fair
value at the acquisition date. In addition, SFAS No. 141R requires that
acquisition costs generally be expensed as incurred, restructuring costs
generally be expensed in periods subsequent to the acquisition date and changes
in accounting for deferred tax asset valuation allowances and acquired income
tax uncertainties after the measurement period impact income tax expense. SFAS
No. 141R is effective for the Companys fiscal years beginning on or after
December 15, 2008, with early adoption prohibited. The Company does not expect
the adoption of SFAS No. 141R to have a material impact on its consolidated
financial statements.

In December
2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB No. 51. SFAS No. 160 requires
minority interests to be recharacterized as noncontrolling interests and
reported as a component of equity. In addition, SFAS No. 160 requires that
purchases or sales of equity interests that do not result in a change in
control be accounted for as equity transactions and, upon a loss of control,
requires the interests sold, as well as any interests retained, to be recorded
at fair value with any gain or loss recognized in earnings. SFAS No. 160 is
effective for fiscal years beginning on or after December 15, 2008, with early
adoption prohibited. The Company does not expect the adoption of SFAS No. 160
to have a material impact on its consolidated financial statements.

In April 2008,
the FASB issued Staff Position (FSP) No. FAS 142-3 Determination of the
Useful Life of Intangible Assets. FSP No. 142-3 amends the factors that should
be considered in developing renewal or extension assumptions used to determine
the useful life of intangible assets under SFAS No. 142 Goodwill and Other
Intangible Assets. FSP No. FAS 142-3 is intended to improve the consistency
between the useful life of a recognized intangible asset under SFAS No. 142 and
the period of the expected cash flows used to measure the fair value of the
asset under SFAS No. 141R and other GAAP. FSP No. FAS 142-3 is effective for
fiscal years beginning after December 15, 2008, with early adoption prohibited.
The Company does not expect the adoption of FSP No. FAS 142-3 to have a
material impact on its consolidated financial statements.

In June 2008,
the FASB issued FSP No. EITF 03-6-1 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities FSP No. EITF
03-6-1 clarifies that all outstanding unvested share-based payment awards that
contain rights to nonforfeitable dividends participate in undistributed
earnings with common shareholders. Awards of this nature are considered
participating securities and the two-class method of computing basic and
diluted earnings per share must be applied. FSP No. EITF 03-6-1 is effective
for fiscal years beginning after December 15, 2008. The Company does not expect
the adoption of FSP No. EITF 03-6-1 to have a material impact on its
consolidated financial statements.

In June 2008,
the FASB issued EITF No. 07-5, Determining Whether an Instrument (or an
Embedded Feature) Is Indexed to an Entitys Own Stock. EITF No. 07-5 provides
that an entity should use a two step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instruments contingent exercise and settlement
provisions. It also clarifies the impact of foreign currency denominated strike
prices and market-based employee stock option valuation instruments on the
evaluation. EITF No. 07-5 is effective for fiscal
years beginning after December 15, 2008. The Company does not expect the
adoption of EITF No. 07-5 to have a material impact on its consolidated
financial statements.

36

---



Table of Contents

In December
2008, the FASB issued FSP FAS 132R-1, Employers Disclosures about
Postretirement Benefit Plan Assets. FSP No. 132R-1 amends SFAS No. 132
(revised 2003), Employers Disclosures about Pensions and Other Postretirement
Benefits, and requires additional disclosures regarding defined benefit plan
assets, including investment policies and strategies, major categories of plan
assets, valuation techniques used to measure the fair value of plan assets and
significant concentrations of risk within plan assets. FSP No. 132R-1 is
effective for fiscal years ending after December 15, 2009. The Company does not
expect the adoption of FSP No. 132R-1 to have a material impact on its
consolidated financial statements.

In April 2009,
the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. FSP FAS 107-1 and APB 28-1 amended SFAS No
107, Disclosures about Fair Value of Financial Instruments, to require
disclosure of the carrying amount and the fair value of all financial
instruments for interim reporting periods and annual financial statements of
publicly traded companies, including the methods and significant assumptions
used to estimate the fair values and any changes in such methods and
assumptions. FSP 107-1 and APB 28-1 also amends APB Opinion No. 28, Interim
Financial Reporting, to require disclosures in summarized financial
information at interim reporting periods. FSP 107-1 and APB 28-1 is effective
for interim reporting periods ending after June 15, 2009. The Companys
adoption of the provisions of FSP 107-1 and APB 28-1 during the three month
period ended June 27, 2009 did not have an impact on the consolidated financial
statements.

In May 2009,
the FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165 establishes
general standards or accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. In addition, SFAS No. 165 sets forth the period after the
balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or
disclosure in financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date
in its financial statements, and the disclosures an entity should make about
events or transactions that occurred after the balance sheet date. SFAS No. 165
is effective for interim or annual financial periods ending after June 15,
2009. The Companys adoption of the provisions of SFAS No. 165 during the three
month period ended June 27, 2009 did not have an impact on the consolidated
financial statements.

Other Matters

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 hedge 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.

The Companys
dividend policy is to maintain a payout ratio that allows dividends to increase
with the long-term growth of earnings per share, while sustaining dividends
through economic cycles. The Companys dividend payout ratio target is
approximately 25% of earnings per share over the long term.

Item 3.
Quantitative and Qualitative Disclosures about Market Risk

The Companys
investment portfolio at June 27, 2009 included $118.9 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 $0.8 million for the
nine-month period ended June 27, 2009.

The Company
operates internationally and is subject to foreign currency exchange rate
fluctuations. 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 $13.5
million in revenue for the nine-month period ended June 27, 2009.

At June 27,
2009, the Companys short-term borrowings outstanding consisted of $40.0
million utilization of the revolving credit facility and $0.2 million in
non-interest bearing notes payable to vendors. This utilization of the credit
facility involves interest payments calculated at a floating rate. In order to
mitigate the Companys exposure to interest rate increases, the Company has
entered into floating to fixed interest rate swap agreements. The notes payable
to vendors are non-interest bearing and, therefore, are not impacted by the
effect of increases or decreases in market interest rates. The
Companys long-term debt has a fixed rate of interest and, therefore, is not
impacted by changes in market interest rates.

37

---



Table of Contents

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 June 27, 2009. 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 June 27, 2009 that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial
reporting. As previously announced, the Company acquired substantially all of
the assets of SANS on September 28, 2008. The Company has not fully evaluated
any changes in internal control over financial reporting associated with this
acquisition and, therefore, any material changes that may result from this
acquisition have not been disclosed in this report. The Company intends to
disclose all material changes, if any, resulting from this acquisition within,
or prior to, the time that our first annual assessment of internal control over
financial reporting is required to include SANS. The results of operations of
SANS have been included in the Companys results of operations since the date
of the acquisition.

PART II
------ OTHER INFORMATION

Item 2.Unregistered
Sales of Equity Securities and Use of Proceeds

Purchases of
Company Equity Securities:

|                              |  |                                    |         |                                 |   |                                                                                         |  |                                                                                       |         |  |  |           | 
|----------------------------- |  | ---------------------------------- | ------- | ------------------------------- | - | --------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- | ------- |  |  | --------- | 
|Period                        |  | Total Number
 of Shares
 Purchased |         | Average
 Price
 Paid per
 Share |   | Total Number
 of Shares
 Purchased as
 Part of
 Publicly
 Announced
 Plans or
 Programs |  | Maximum
 Number of
 Shares
 that May Yet
 be Purchased
 Under the
 Plans or
 Programs |        
|March 29, 2009 -
 May 2, 2009 |  |                                    | 48,000  |                                 | $ | 21.86                                                                                   |  |                                                                                       | 48,000  |  |  | 2,217,538 | 
|May 3, 2009 -
 May 30, 2009   |  |                                    | 38,000  |                                 | $ | 21.25                                                                                   |  |                                                                                       | 38,000  |  |  | 2,179,538 | 
|May 31, 2009 -
 June 27, 2009 |  |                                    | 40,000  |                                 | $ | 21.72                                                                                   |  |                                                                                       | 40,000  |  |  | 2,139,538 | 
|Total                         |  |                                    | 126,000 |                                 | $ | 21.63                                                                                   |  |                                                                                       | 126,000 |  |  |           | 

The Company
purchases its common stock to mitigate dilution related to new shares created
by employee equity compensation such as stock option, restricted stock, and
employee stock purchase plan awards, as well as to return excess capital to
shareholders.

During the
Third Quarter of Fiscal 2009, Company share purchases were executed under a 3.0
million share purchase authorization approved by the Companys Board of
Directors and announced on August 20, 2007. Authority over pricing and timing
under both authorizations has been delegated to management. The share purchase
authorizations have no expiration date.

38

---



Table of Contents

Item 6.Exhibits

|                 |  |                                                                                                                                         |             | 
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- | ----------- | 
|Exhibit 
 Number |  |                                                                                                                                         | Description | 
|                 |  |                                                                                                                                         |             | 
|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) (filed herewith).
|                 |  |                                                                                                                                        
|32.2             |  | Certification
 of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002 (18 U.S.C. 1350) (filed herewith).

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:
 August 3, 2009 |  | /s/ LAURA B.
 HAMILTON                     
|                       |  | Laura B.
 Hamilton                         
|                       |  | Chair and
 Chief Executive Officer         
|                       |  |                                            
|Dated:
 August 3, 2009 |  | /s/ SUSAN E.
 KNIGHT                       
|                       |  | Susan E.
 Knight                           
|                       |  | Vice
 President and Chief Financial Officer

39

---



Table of Contents

EXHIBIT INDEX TO FORM 10-Q

|     |  |                                                                                                                                        
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification
 of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002 (18 U.S.C. 1350) (filed herewith).
|     |  |                                                                                                                                        
|31.2 |  | Certification
 of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002 (18 U.S.C. 1350) (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) (filed herewith).
|     |  |                                                                                                                                        
|32.2 |  | Certification
 of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002 (18 U.S.C. 1350) (filed herewith).

---