MTSC MTS Systems Corporation

MTS Systems Corp. said it is investigating possible corporate violations by its leadership in China, and will delay releasing its full quarterly and annual reports.

The test-sensor company's stock dropped 8.1% to $50.10 in early trading Tuesday, pushing the year's slide to more than 20%.

"We are deeply disappointed to report that we recently discovered that certain individuals in our leadership in China appear to have violated MTS's code of conduct, including association with an independent business that may compete with MTS in certain markets," said Chief Executive Jeffrey Graves.

MTS, which said it has already taken "certain remedial measures" in response to the issue, said the board's audit committee has sought independent external counsel and will review for potential law violations.

China was among the Asia-Pacific regions MTS was already investigating for potential Foreign Corrupt Practices Act violations.

"We took certain initial remedial actions, including changes to internal-control procedures and removing certain persons formerly employed in our China business," the company said in August's third-quarter report filing to the Securities and Exchange Commission.

Still, the company said results for its latest quarter topped internal estimates and raised its guidance for the year. MTS said full-year revenue is expected to range between $645 million and $650 million, up from previous guidance for $630 million to $640 million. The company now expects earnings of $1.65 to $1.70 a share, up from previous guidance for $1.35 to $1.50.

Mr. Graves said the company ended the fiscal year on a "strong note" and pointed to continued improvements in business performance.

Acquisition-related and restructuring costs for the year of about $23 million were much higher than previously guided for, hurt by the timing of a $16 million fair value adjustment to acquired inventory—denting the final quarter fiscal 2016 and the first quarter of fiscal 2017 each by $8 million.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

November 29, 2016 11:35 ET (16:35 GMT)

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