UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

-----------------------------------------

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  November 8, 2017

ESCO TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in Charter)

Registrant's telephone number, including area code:   314-213-7200

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]	Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b))

[  ]	Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.113d-4 (c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Today, November 14, 2017, the Registrant ("Company") is issuing a press release (furnished as Exhibit 99.1 to this report) announcing its financial and operating results for the fourth quarter and  fiscal year ended September 30, 2017.  See Item 7.01, Regulation FD Disclosure, below.

Election of New Director and Reclassification of Directors

Effective November 8, 2017 the registrant's Board of Directors, by unanimous written consent pursuant to Section 3.1 of its Bylaws, increased the authorized size of its Board of Directors from seven to eight members and elected Mr. Patrick M. Dewar, age 57, as a director to fill the vacancy thereby created.

Mr. Dewar currently serves as Chief Executive  of The Trenton Group LLC, headquartered in Trenton, New Jersey. Previously, Mr. Dewar spent 34 years in the Aerospace Sector with GE Aerospace and Lockheed Martin, where he created and led Lockheed Martin International as an Executive Vice President managing over $10 billion in annual revenue. He holds a Master of Science degree in Electrical Engineering from Drexel University as well as a Bachelor of Science degree in Engineering from Swarthmore College. Mr. Dewar is a member of the Council of Foreign Relations and serves as a senior advisor to numerous investment firms on Aerospace & Defense matters.

Mr. Dewar was selected to serve the Company as his extensive strategic and operational experience in the aerospace and defense markets will allow him to assist the board in guiding strategy from the highest level. The Board of Directors performed extensive diligence in its search, including utilizing a globally recognized executive search firm.

Mr. Dewar will receive compensation for his service on the Board of Directors and its Committees pursuant to the Registrant's Compensation Plan for Non-Employee Directors, as amended, on the same basis as the Registrant's other directors; provided that his cash compensation for the remainder of calendar 2017 will be prorated at 25% of a full year's fees, and on or about November 17, 2017 he will receive a standard directors' quarterly stock award of 900 shares for the fourth quarter of calendar 2017.

Mr. Dewar was designated as a Class III Director, to serve for a term ending at the 2020 Annual Meeting of Shareholders. He will also serve on the Audit and Finance Committee of the Board of Directors. In order to retain equality of size among the three director classes as nearly as practicable, Mr. Larry .Solley, previously a Class III director, was reclassified as a Class II Director to serve for a term ending at the 2019 annual meeting of shareholders.

Amendments to Performance Compensation Plan

On November 9, 2017 the Compensation and Human Resources Committee of the registrant's Board of Directors amended and restated the registrant's Performance Compensation Plan for selected corporate and subsidiary officers and key managers (the "PCP"), including the registrant's executive officers.  The PCP had last been amended in 2016.  The amendments do not increase the amounts or change the forms of compensation which may be paid to the eligible officers or managers, but primarily expand the terms of the PCP to allow awards under the PCP to qualify for favorable treatment as "performance-based compensation" under Section 162(m) of the Internal Revenue Code (Section 162(m) Awards").  Prior to the amendment, Section 162(m) Awards could be made only under the registrant's separate Incentive Compensation Plan (the "ICP").  The purpose for the amendments was to permit future performance-based cash incentive awards, including those made to the registrant's executive officers on November 9, 2017 described in the next section, to be made under a single plan, the PCP, rather than having to be divided between the PCP and the ICP based on whether they were intended to qualify as Section 162(m) Awards.  It is the registrant's current intention not to make any future awards under the ICP.  A copy of the PCP as restated to incorporate the amendments is attached to this report as Exhibit 10.1, and a copy of the restated PCP marked to indicate the principal substantive changes from the previous version is attached as Exhibit 10.2.

Fiscal 2018 Executive Officer Base Salaries and Cash Incentive Compensation

On November 9, 2017, the Human Resources and Compensation Committee (the "Committee") of the Company's Board of Directors approved the following fiscal 2018 base salaries and target cash incentive compensation opportunities for its executive officers:

For fiscal 2018 the Committee determined to allocate 100% of the executive officers' cash incentive compensation opportunity to the PCP, as amended (see above).  The Committee also approved the fiscal 2018 performance criteria for determining the percentage of such target incentive compensation opportunity that will actually be earned by the executive officers, depending on actual fiscal 2018 results compared to the criteria.  The Committee established two performance criteria for fiscal 2018:  earnings per share (EPS), weighted at 70% of the total target opportunity, and cash flow, weighted at 30% of the total target opportunity. The actual cash incentive compensation payable under the PCP for fiscal 2018 will range from 0.0 to 2.0 times the target opportunity for EPS and 0.2 to 2.0 times the target opportunity for cash flow, depending on actual 2018 performance, based on a separate matrix for each of the measures.

Today, November 14, 2017, the Registrant is issuing a press release (Exhibit 99.1) announcing its financial and operating results for the fiscal year ended September 30, 2017.  The Registrant will conduct a related Webcast conference call today at 4:00 p.m. Central Time.  This press release will be posted on the Registrant's web site located at http://www.escotechnologies.com.  It can be viewed through the "Investor Relations" page of the web site under the tab "Press Releases," although the Registrant reserves the right to discontinue that availability at any time.

On November 9, 2017 the Compensation and Human Resources Committee of the registrant's Board of Directors amended and restated the registrant's Compensation Plan for Non-Employee Directors (the "Plan"), which had last been amended in 2014.  The amendments do not increase the amounts or change the forms of compensation which may be paid to the registrant's non-employee directors, but primarily expand and clarify the terms of the Plan relating to the forms and times of directors' compensation payments, the method and timing of directors' elections to defer compensation, and the timing and payout of deferred compensation payments, and add provisions designed to ensure compliance with income tax provisions relating to deferred compensation.  A copy of the Plan as restated to incorporate the amendments is attached to this report as Exhibit 10.3.

The information in this report furnished pursuant to Item 2.02 and Item 7.01, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 as amended ("Exchange Act") or otherwise subject to the liabilities of that section, unless the Registrant incorporates it by reference into a filing under the Securities Act of 1933 as amended or the Exchange Act.

References to the Registrant's web site address are included in this Form 8-K and the press release only as inactive textual references, and the Registrant does not intend them to be active links to its web site.  Information contained on the Registrant's web site does not constitute part of this Form 8-K or the press release.

 

 

 

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 hereunto duly authorized.

Date:  November 14, 2017

ESCO TECHNOLOGIES INC.

Gary E. Muenster

Executive Vice President
and Chief Financial Officer

EXHIBIT 10.1

ESCO TECHNOLOGIES INC.

PERFORMANCE COMPENSATION PLAN

Adopted August 2, 1993

As Amended and Restated through November 9, 2017

In this Plan, the following capitalized terms shall have the following meanings unless the context clearly requires otherwise:

(a)

"Board of Directors" means the Board of Directors of the Company.

(b)

"Chief Executive Officer" means the Chief Executive Officer of the Company.

(c)

"Committee" means the Human Resources and Compensation Committee of the Board of Directors.

(d)

"Covered Employee" means, as of any date, (i) any individual who, with respect to the previous Fiscal Year, was a "covered employee" of the Company within the meaning of Section 162(m) of the Code and the Regulations promulgated thereunder; provided, however, that the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any award under the Plan or at any subsequent time, as reasonably expected not to be such a "covered employee" with respect to the current Fiscal Year or to the Fiscal Year in which any applicable award hereunder will be paid, and (ii) any individual who is designated by the Committee, in its discretion, at the time of any award or at any subsequent time, as reasonably expected to be such a "covered employee" with respect to the current Fiscal Year or with respect to the Fiscal Year in which any applicable award hereunder will be paid, and(iii) any other person who is defined as a "covered employee" under Section 162(m) of the Internal Revenue Code of 1986, as amended.

(e)

"Fiscal Year" means the fiscal year of the Company, which is currently the twelve‑month period beginning October 1 and ending September 30.

(f)

"Participant" means an employee of the Company or a Subsidiary who has been selected by the Committee to participate in the Plan.

(g)

"Performance Compensation Award" or "Award" means the target amount a Participant is eligible to receive under the Plan for a Fiscal Year subject to specified performance criteria.

(h)

"Performance Compensation Payment" or "Payment" means the amount actually payable to a Participant based on the target amount for such Participant and the satisfaction of the performance criteria applicable to such Participant.

(i)

"Plan Administrator" means the Company's Vice President–Human Resources or other Company officer designated by the Committee.

(j)

"Subsidiary" means any corporation, partnership or other entity a majority of whose equity interests are owned directly or indirectly by the Company.

Participation in the Plan is limited to those employees of the Company and Subsidiaries selected by the Committee upon recommendation by the Chief Executive Officer.  During the first 90 days of each Fiscal Year, the Chief Executive Officer shall submit to the Committee (i) a proposed list for each Subsidiary and the Company of the Participants and their corresponding Performance Compensation Awards for that Fiscal Year, and (ii) the proposed performance criteria to be used for determining Payments based on the Awards, which may include but, except in the case of 162(m) Awards, need not be limited to the performance criteria listed in Subsection IV.B.  Upon approval of the Awards and the associated performance criteria by the Committee, the Plan Administrator shall make arrangements to ensure that each Participant is notified of the amount of his or her Performance Compensation Award as well as the performance criteria and the other terms and conditions applicable to the Award.  Additions or deletions to the list of Participants during a Fiscal Year shall be made only in the event of an unusual circumstance, such as a promotion, layoff, disability, death, new hire, termination, or retirement.

Prior to the end of each Fiscal Year, the Committee, after consultation with the Plan Administrator and on behalf of the Board of Directors and the management of each Subsidiary, shall determine the minimum aggregate amount of Payments to be made by the Company and each Subsidiary pursuant to the Awards granted under the Plan for that Fiscal Year, other than Payments to be made pursuant to 162(m) Awards which will be determined only after the end of the fiscal year.

Once the Payments have been approved by the Committee pursuant to Section VI, the Plan Administrator shall take the necessary actions to notify each Participant of the amount of his or her Performance Compensation Payment.  Performance Compensation Payments will be made through payroll not later than 2½ months following the end of each Fiscal Year.  The Company shall withhold from each Payment all taxes required to be withheld by any federal, state or local government and any other applicable deductions authorized by the Participant.

Each Participant shall have the right to designate a beneficiary, and to change such beneficiary from time to time, by filing a request in writing with the Plan Administrator.  If a Participant dies after the end of the Fiscal Year but prior to receiving the Payment due for such Fiscal Year, the Payment will be paid to the Participant's designated beneficiary at the time such amount would have been paid to the Participant, subject to Section VII.  In the event the Participant has not designated a beneficiary, or in the event a beneficiary predeceases the Participant, the amount otherwise payable to such beneficiary shall be paid to the person in, or divided equally among the persons in, the first of the following classes of successive preference beneficiaries in which there shall be any person surviving such Participant:

(1)

The Participant's spouse;

(2)

The Participant's children; or

(3)

The Participant's executors or administrators;

provided that any amount payable to a minor may instead be paid to such adult or adults as, in the sole opinion of the Plan Administrator, are primarily responsible for the custody and support of such minor.

The Committee has the sole responsibility for overall administration and control of the Plan, including the selection of Participants, the amounts of Awards, the selection and approval of performance criteria, the determination of the minimum total Payments under the Plan for each Fiscal Year, the satisfaction of performance criteria, and the final determination of Payments to each Participant.  The Plan Administrator shall be responsible for implementing the actions required under the Plan.

A Participant must be in the employ of the Company or a Subsidiary on the date a Performance Compensation Payment of an Award is made pursuant to Section VII in order to be eligible for Payment pursuant to the Award.  Notwithstanding the foregoing, however, in the event that, either before or after the end of the Fiscal Year, a Participant's employment is terminated by reason of the Participant's death or disability, by the Company without cause, or by the Participant due to retirement on or after the age of 60, the Committee shall have the sole discretion as to whether the Participant shall be entitled to any Payment, and if so, the amount of such Payment, and any such amount shall be paid at the time determined pursuant to Section VII.

The Committee may amend or terminate the Plan at any time, but no amendment may impair any of the rights or obligations under any Award theretofore granted to a Participant under the Plan without such Participant's consent; provided, however, that notwithstanding the foregoing the Committee may amend the Plan or any Awards in such manner as it deems necessary to comply with the requirements of any applicable law, rule or regulation.

In the event that a Participant (i) during the period commencing upon receipt of any Performance Compensation Payment to the Participant and ending two (2) years after such receipt or (ii) at any time during the term of the Participant's employment by the Company or a Subsidiary:

(a)

As an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, carries on any business or becomes involved in any business activity, which (i) is competitive with the business of the Company or any Subsidiary, as presently conducted or as said business may evolve in the ordinary course, and (ii) is a business or business activity in which the Participant is engaged in the course of the Participant's employment with the Company or any Subsidiary, or

(b)

As an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, recruits, solicits or hires, or assists anyone else in recruiting, soliciting or hiring, any employee of the Company or any Subsidiary for employment with any competitor of the Company or any Subsidiary, or

(c)

Induces or attempts to induce, or assists anyone else to induce or attempt to induce, any customer of the Company or any Subsidiary to discontinue its business with the Company or any Subsidiary, or

(d)

Engages in the unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary resulting in harm to the Company or any Subsidiary, or

(e)

Engages in intentional misconduct resulting in a restatement of the Company's financials or in an increase in the Participant's Payment or other incentive or equity compensation,

(any conduct described in clauses XIII(a) through XIII(e) being referred to herein as "Misconduct"); then:

(A)

In the case of Misconduct resulting in a restatement of the Company's financials described in clause XIII(e), the Company shall be entitled to recover from the Participant any Performance Compensation Payments made to the Participant during any period for which restatement of the Company's financials is required but not to exceed three years; and

(B)

In the case of Misconduct described in clauses XIII(a) through XIII(d), or in the case of intentional Misconduct described in clause XIII(e) where the Misconduct results in an increase in the Participant's Payment or other incentive or equity compensation, the Company shall be entitled to recover from the Participant any Performance Compensation Payments made to the Participant during the three-year period preceding such Misconduct and during any period between such Misconduct and the Company's discovery thereof.  The Committee shall have sole discretion in determining the amount that shall be recovered from the Participant under this Section XIII, provided that to the extent Performance Compensation Payments have been recovered by the Company under the Company's Dodd-Frank Act Recovery Policy such amounts shall not be recoverable pursuant to this Section XIII.

EXHIBIT 10.2

ESCO TECHNOLOGIES INC.

PERFORMANCE COMPENSATION PLAN

Adopted August 2, 1993

As Amended and Restated through November 9, 2017

[Marked to show principal additions (by underlining) and deletions (by strikethroughs)
from the Plan as in effect prior to the November 9, 2017 amendments]

In this Plan, the following capitalized terms shall have the following meanings unless the context clearly requires otherwise:

(a)

"Board of Directors" means the Board of Directors of the Company.

(b)

"Chief Executive Officer" means the Chief Executive Officer of the Company.

(c)

"Committee" means the Human Resources and Compensation Committee of the Board of Directors.

(d)

"Covered Employee" means, as of any date, (i) any individual who, with respect to the previous Fiscal Year, was a "covered employee" of the Company within the meaning of Section 162(m) of the Code and the Regulations promulgated thereunder; provided, however, that the term "Covered Employee" shall not include any such individual who is designated by the Committee, in its discretion, at the time of any award under the Plan or at any subsequent time, as reasonably expected not to be such a "covered employee" with respect to the current Fiscal Year or to the Fiscal Year in which any applicable award hereunder will be paid, and (ii) any individual who is designated by the Committee, in its discretion, at the time of any award or at any subsequent time, as reasonably expected to be such a "covered employee" with respect to the current Fiscal Year or with respect to the Fiscal Year in which any applicable award hereunder will be paid, and(iii) any other person who is defined as a "covered employee" under Section 162(m) of the Internal Revenue Code of 1986, as amended.

(e)

"Fiscal Year" means the fiscal year of the Company, which is currently the twelve‑month period beginning October 1 and ending September 30.

(f)

"Participant" means an employee of the Company or a Subsidiary who has been selected by the Committee to participate in the Plan.

(g)

"Performance Compensation Award" or "Award" means the target amount a Participant is eligible to receive under the Plan for a Fiscal Year subject to specified performance criteria.

(h)

"Performance Compensation Payment" or "Payment" means the amount actually payable to a Participant based on the target amount for such Participant and the satisfaction of the performance criteria applicable to such Participant.

(i)

"Plan Administrator" means the Company's Vice President–Human Resources or other Company officer designated by the Committee.

(j)

"Subsidiary" means any corporation, partnership or other entity a majority of whose equity interests are owned directly or indirectly by the Company.

Participation in the Plan is limited to those employees of the Company and Subsidiaries selected by the Committee upon recommendation by the Chief Executive Officer.  During the first 90 days of each Fiscal Year, the Chief Executive Officer shall submit to the Committee (i) a proposed list for each Subsidiary and the Company of the Participants and their corresponding Performance Compensation Awards for that Fiscal Year, and (ii) the proposed performance criteria to be used for determining Payments based on the Awards, which may include but, except in the case of 162(m) Awards, need not be limited to the performance criteria listed in Subsection IV.B.  Upon approval of the Awards and the associated performance criteria by the Committee, the Plan Administrator shall make arrangements to ensure that each Participant is notified of the amount of his or her Performance Compensation Award as well as the performance criteria and the other terms and conditions applicable to the Award.  Additions or deletions to the list of Participants during a Fiscal Year shall be made only in the event of an unusual circumstance, such as a promotion, layoff, disability, death, new hire, termination, or retirement.

Prior to the end of each Fiscal Year, the Committee, after consultation with the Plan Administrator and on behalf of the Board of Directors and the Board of Directors management of each Subsidiary, shall determine the minimum aggregate amount of Payments to be made by the Company and each Subsidiary pursuant to the Awards granted under the Plan for that Fiscal Year, other than Payments to be made pursuant to 162(m) Awards which will be determined only after the end of the fiscal year.

Once the Payments have been approved by the Committee pursuant to Section VI, the Plan Administrator shall take the necessary actions to notify each Participant of the amount of his or her Performance Compensation Payment.  Performance Compensation Payments will be made through payroll by December 15^th not later than 2½ months following the end of each Fiscal Year.  The Company shall withhold from each Payment all taxes required to be withheld by any federal, state or local government and any other applicable deductions authorized by the Participant.

Each Participant shall have the right to designate a beneficiary, and to change such beneficiary from time to time, by filing a request in writing with the Plan Administrator.  If a Participant dies after the end of the Fiscal Year but prior to receiving the Payment due for such Fiscal Year, the Payment will be paid to the Participant's designated beneficiary at the time such amount would have been paid to the Participant, subject to Section VII.  In the event the Participant has not designated a beneficiary, or in the event a beneficiary predeceases the Participant, the amount otherwise payable to such beneficiary shall be paid to the person in, or divided equally among the persons in, the first of the following classes of successive preference beneficiaries in which there shall be any person surviving such Participant:

(1)

The Participant's spouse;

(2)

The Participant's children; or

(3)

The Participant's executors or administrators;

provided that any amount payable to a minor may instead be paid to such adult or adults as, in the sole opinion of the Plan Administrator, are primarily responsible for the custody and support of such minor.

The Committee has the sole responsibility for overall administration and control of the Plan, including the selection of Participants, the amounts of Awards, the selection and approval of performance criteria, the determination of the minimum total Payments under the Plan for each Fiscal Year, the satisfaction of performance criteria, and the final determination of Payments to each Participant.  The Plan Administrator shall be responsible for implementing the actions required under the Plan.

A Participant must be in the employ of the Company or a Subsidiary on the date a Performance Compensation Payment of an Award is made pursuant to Section VII in order to be eligible for Payment pursuant to the Award.  Notwithstanding the foregoing, however, in the event that, either before or after the end of the Fiscal Year, a Participant's employment is terminated by reason of the Participant's death or disability, by the Company without cause, or by the Participant due to retirement on or after the age of 60, the Committee shall have the sole discretion as to whether the Participant shall be entitled to any Payment, and if so, the amount of such Payment, and any such amount shall be paid at the time determined pursuant to Section VII.

The Committee may amend or terminate the Plan at any time, but no amendment may impair any of the rights or obligations under any Award theretofore granted to a Participant under the Plan without such Participant's consent; provided, however, that notwithstanding the foregoing the Committee may amend the Plan or any Awards in such manner as it deems necessary to comply with the requirements of any applicable law, rule or regulation.

In the event that a Participant (i) during the period commencing upon receipt of any Performance Compensation Payment to the Participant and ending two (2) years after such receipt or (ii) at any time during the term of the Participant's employment by the Company or a Subsidiary:

(a)

As an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, carries on any business or becomes involved in any business activity, which (i) is competitive with the business of the Company or any Subsidiary, as presently conducted or as said business may evolve in the ordinary course, and (ii) is a business or business activity in which the Participant is engaged in the course of the Participant's employment with the Company or any Subsidiary, or

(b)

As an individual or as a partner, employee, agent, advisor, consultant or in any other capacity of or to any person, firm, corporation or other entity, directly or indirectly, recruits, solicits or hires, or assists anyone else in recruiting, soliciting or hiring, any employee of the Company or any Subsidiary for employment with any competitor of the Company or any Subsidiary, or

(c)

Induces or attempts to induce, or assists anyone else to induce or attempt to induce, any customer of the Company or any Subsidiary to discontinue its business with the Company or any Subsidiary, or

(d)

Engages in the unauthorized use or disclosure of confidential information or trade secrets of the Company or any Subsidiary resulting in harm to the Company or any Subsidiary, or

(e)

Engages in intentional misconduct resulting in a restatement of the Company's financials or in an increase in the Participant's Payment or other incentive or equity compensation,

(any conduct described in clauses XIII(a) through XIII(e) being referred to herein as "Misconduct"); then:

(A)

In the case of Misconduct resulting in a restatement of the Company's financials described in clause XIII(e), the Company shall be entitled to recover from the Participant any Performance Compensation Payments made to the Participant during any period for which restatement of the Company's financials is required but not to exceed three years; and

(B)

In the case of Misconduct described in clauses XIII(a) through XIII(d), or in the case of intentional Misconduct described in clause XIII(e) where the Misconduct results in an increase in the Participant's Payment or other incentive or equity compensation, the Company shall be entitled to recover from the Participant any Performance Compensation Payments made to the Participant during the three-year period preceding such Misconduct and during any period between such Misconduct and the Company's discovery thereof.  The Committee shall have sole discretion in determining the amount that shall be recovered from the Participant under this Section XIII, provided that to the extent Performance Compensation Payments have been recovered by the Company under the Company's Dodd-Frank Act Recovery Policy such amounts shall not be recoverable pursuant to this Section XIII.

EXHIBIT 10.3

ESCO TECHNOLOGIES INC.

COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Restated to reflect all amendments through November 8, 2017

¹ Note: Originally authorized number of 200,000 shares was automatically doubled to 400,000 as a result of the 2005 stock split.

ESCO TECHNOLOGIES INC.
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

Pursuant to the ESCO Technologies Inc. Compensation Plan For Non-Employee Directors:

1.  COMPENSATION TO BE DEFERRED:

£  I hereby elect to defer payment of my Cash Compensation.

£  I hereby elect to defer distribution of my Stock Compensation.

I understand that all deferrals will be credited as Stock Equivalents to my Deferred Compensation Account.

2.  TYPE OF DISTRIBUTION:

Deferred Stock Compensation:

£  Lump Sum – in shares

£  Installments over ____years (may not exceed 5 years)

£  Semi-Annually in shares

£  Annually in shares

Deferred Cash Compensation:

£  Lump Sum – in cash

£  Lump Sum – in shares

£  Installments over ____years (may not exceed 5 years)

£  Semi-Annually ______% in cash; ____% in shares

£  Annually ______% in cash; ____% in shares

£  Quarterly in cash

3.  TIME OF DISTRIBUTION:

£  Lump sum distribution to be made on __________________________.

£  Installment distributions to commence on _______________________.

£  Distribution to be made or commence upon my retirement as a Director of the Company.

4.  DESIGNATION OF BENEFICIARY: (Please include social security number and address.)
In the absence of such designation, any remaining distribution(s) will be made to your estate.

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

___________________________________________________________________________________

5.  EFFECTIVE PERIOD:

This deferment will remain in effect with respect to each such subsequent year until such time as I may revoke the deferment or distributions commence, whichever is earlier.  Such later filings shall apply only to compensation to be earned after the calendar year in which such later filings are made.

Exhibit 99.1

 

 

NEWS FROM

For more information contact:

Kate Lowrey

Director, Investor Relations

ESCO Technologies Inc.

(314) 213-7277

- Net earnings of $54 million and Adjusted EBITDA of $123 million -

-  GAAP EPS $2.07 and Adjusted EPS $2.22 -

ST. LOUIS, November 14, 2017 – ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the fourth quarter (Q4 2017) and fiscal year ended September 30, 2017 (2017), compared to the fourth quarter (Q4 2016) and fiscal year ended September 30, 2016 (2016).

The Company previously announced it acquired Mayday Manufacturing Co. and its affiliate, Hi-Tech Metals, Inc. (collectively Mayday) on November 7, 2016, NRG Systems Inc. (NRG) on May 8, 2017, the assets of Morgan Schaffer Inc. (Morgan Schaffer) on May 25, 2017, and the assets of Vanguard Instruments Company (Vanguard) on August 30, 2017. Net sales, earnings, acquisition costs, non-cash purchase accounting inventory step-up charges, and amortization of intangible assets related to these entities are included in the 2017 operating results from the date of acquisition.

The financial results presented include certain non-GAAP financial measures such as EBIT, EBITDA (defined as earnings before interest, taxes, depreciation and amortization), Adjusted EBITDA (defined as EBITDA excluding certain charges, such as non-cash purchase accounting inventory step up charges, and acquisition costs incurred to complete the transactions), and Adjusted EPS. Any non-GAAP financial measures presented are reconciled to their respective GAAP equivalents.

Management believes these non-GAAP financial measures are useful in assessing the ongoing operational profitability of the Company's business segments, and therefore, allows shareholders better visibility into the Company's underlying operations. See "Non-GAAP Financial Measures" described below.

·	2017 GAAP EPS was $2.07 per share and Adjusted EPS was $2.22 per share, which excludes the ($0.15) per share impact ($6.1 million pretax) of non-cash purchase accounting inventory step-up charges and costs incurred to complete the 2017 acquisitions;

·	2016 GAAP EPS was $1.77 per share and Adjusted EPS was $2.03 per share (the adjustments related to the prior year restructuring charges were described in earlier releases);

·	2017 GAAP net earnings were $54 million compared to $46 million in 2016; and,

·	Adjusted EBITDA increased 22 percent to $123 million in 2017 from $101 million in 2016.

·	Q4 2017 GAAP EPS was $0.74 per share and Adjusted EPS was $0.79 per share, which excludes ($0.05) per share impact ($1.8 million pretax) of non-cash purchase accounting inventory step-up charges and costs incurred to complete the 2017 acquisitions;

·	Q4 2016 GAAP EPS was $0.65 per share and Adjusted EPS was $0.67 per share (the adjustments related to prior year Q4 restructuring charges were described in earlier releases);

·	Q4 2017 GAAP net earnings were $19 million compared to $17 million in Q4 2016; and,

·	Adjusted EBITDA increased 34 percent to $43 million in Q4 2017 from $32 million in Q4 2016.

Adjusted EBITDA is reconciled to GAAP net earnings in the Condensed Business Segment Information table below for all periods presented.

·	2017 sales increased $115 million (20 percent) to $686 million compared to $571 million in 2016;

·

On a segment basis, 2017 Filtration sales increased $72 million, or 35 percent compared to 2016 primarily driven by the contribution of Westland and Mayday sales of $61 million. Technical Packaging sales increased $8 million, or 11 percent compared to 2016 driven by Plastique, and Test sales were $161 million in both periods presented. USG sales increased $35 million, or 27 percent, as Doble sales increased $11 million (9 percent) driven by the additional sales contribution from new products and software solutions, and NRG / Morgan Schaffer / Vanguard contributed $24 million in sales since the dates of acquisition;

·

SG&A expenses increased $17 million in 2017 compared to 2016 primarily due to additional expenses related to Westland, Mayday, NRG, Morgan Schaffer and Vanguard in the current period, coupled with additional sales and marketing expenses at Doble to support future revenue growth. Acquisition costs are recorded at Corporate;

·	Entered orders were $737 million in 2017 (book-to-bill of 1.07x) reflecting a $51 million (16 percent) increase in backlog during the year and an ending backlog of $377 million at September 30, 2017;

·	Filtration orders were $286 million (book-to-bill of 1.03x) in 2017 comprised of recurring commercial aerospace orders and additional space and navy products;

·	Test orders were a record $199 million in 2017 (book-to-bill of 1.23x) which reflects increasing momentum in the wireless, electric vehicle, and automotive chamber markets;

·	USG orders were $164 million in 2017 (book-to-bill of 1.01x) which reflects increased orders for new products such as the Doble Universal Controller (DUC), on-line monitoring solutions, dissolved gas analyzers (DGA's) and additional software applications;

·	Technical Packaging orders were $87 million in 2017 (book-to-bill of 1.05x) driven by higher KAZ, medical, medical device, and pharmaceutical projects; and,

·	Net cash provided by operating activities was $67 million in 2017 which resulted in net debt of $229 million (outstanding borrowings less cash on hand) at September 30, 2017 and a 2.2x leverage ratio (gross debt outstanding / Adjusted EBITDA).

Vic Richey, Chairman and Chief Executive Officer, commented, "I'm pleased with the way we wrapped up the year as we delivered EPS and Adjusted EBITDA within our previously expected ranges, and we successfully completed several acquisitions, which remains one of our key strategic goals. I've mentioned this before, but it is worth repeating: Not only did we add great companies to our portfolio, we also added very solid management teams who share our vision and our values.

"Regarding the recent acquisitions, I'm pleased to see the integration is going smoothly and is nearly complete, which supports my enthusiasm for USG's outlook as the group has come together with a unified focus on sales growth, market expansion, new product development, and enhanced operating margins.

"Whenever you add new companies to an existing portfolio, it is never without risk. But I'm thrilled with the way our entire company, legacy entities and new partners, came together and collectively delivered $123 million of Adjusted EBITDA in 2017. This reflects a 22 percent increase over prior year and represents the best year in ESCO's history.

"Touching on a few Q4 operating highlights, Filtration delivered a 22 percent EBIT margin driven by outstanding performance at Crissair and VACCO. Test reported a 16 percent EBIT margin in Q4 and during the past six months of 2017, delivered $89 million in sales at a 15 percent EBIT margin. Doble continued to outperform in Q4 by delivering an EBIT margin above 28 percent as its new products, software and solution offerings continue to gain traction in the utility market.

"Wrapping up the year, a clear highlight for the Company is the strength of our order activity as all four operating segments achieved book-to-bill ratios greater 1.0x, led by Test's nearly $200 million in new business.

"As we enter 2018, we plan to build on the successes we achieved in 2017 and benefit from having aggressively addressed the challenges we faced during the past year, which gives me a favorable view of the future with our goal remaining unchanged – to increase long-term shareholder value."

The next quarterly cash dividend of $0.08 per share will be paid on January 19, 2018 to stockholders of record on January 4, 2018.

Effective November 8, 2017, the Company added an additional independent director, Patrick M. (Pat) Dewar to the Company's Board of Directors.

Mr. Dewar currently serves as Chief Executive  of The Trenton Group LLC. Previously, Mr. Dewar spent 34 years in the Aerospace Sector with GE Aerospace and Lockheed Martin, where he created and led Lockheed Martin International as an Executive Vice President managing over $10 billion in annual revenue. He holds a Master of Science degree in Electrical Engineering from Drexel University as well as a Bachelor of Science degree in Engineering from Swarthmore College. Mr. Dewar is a member of the Council of Foreign Relations and serves as a senior advisor to numerous investment firms on Aerospace & Defense matters.

Mr. Dewar was selected to serve the Company as his extensive strategic and operational experience in the aerospace and defense markets will allow him to assist the board in guiding strategy from the highest level.

Adding a new director further enhances Corporate Governance, facilitates board refreshment, and adds new and relevant experience supplementing existing independent director oversight. The Board of Directors performed extensive diligence in its search, including utilizing a globally recognized executive search firm.

With the increased level of M&A activity, Management has placed more emphasis on Adjusted EBITDA as a supplement to EPS as it believes this is a relevant metric to be considered for measuring ongoing operating performance as well as the Company's enterprise valuation. Adjusted EBITDA is also a key financial metric used by Management when determining the appropriate price for acquisitions.

Management continues to see meaningful sales and Adjusted EBITDA growth across each of the Company's business segments and anticipates growth rates in 2018 and beyond that exceed the Company's defined peer group and the broader industrial market.

The details of Management's growth expectations for 2018 compared to 2017 are as follows:

·

Sales are expected to increase approximately 13 percent driven by: incremental sales from acquisitions being included for a full year; increased commercial aerospace deliveries at PTI, Crissair and Mayday; higher organic sales at USG; significantly higher sales at Test including the catch-up of 2017 deliveries as well as significant new product wins currently in backlog; partially offset by a reduction in lower margin industrial/automotive market product deliveries at PTI as it exits that market; and flat sales in Technical Packaging;

·	Adjusted EBITDA is expected to increase between 15 and 17 percent, resulting in Adjusted EBITDA in the range of $141 million to $143 million, compared to 2017 Adjusted EBITDA of $123 million;

·	Interest expense on higher debt (acquisition funding) is expected to be approximately $9.5 million, reflecting an increase of  $4.9 million (or $0.12 per share) over the $4.6 million of interest expense in 2017;

·	Non-cash depreciation and amortization of intangibles is expected to increase approximately $7.1 million (or $0.18 per share after-tax) as a result of the recent acquisitions. Purchase accounting intangible asset amortization charges are recorded at Corporate;

·

Income tax expense is expected to increase in 2018 as Management is projecting a 35 percent effective tax rate calculated on higher pretax earnings. Management's expected rate excludes any impact resulting from potential tax reform. When compared to the 33 percent tax rate in 2017, the 2 percent higher rate on the additional pretax earnings negatively impacts 2018 EPS ($0.07 per share); and,

·	In summary, Management projects 2018 GAAP EPS to be in the range of $2.30 to $2.40 per share, including the profit contributions from the recent acquisitions, the additional depreciation and amortization charges, higher interest, and incremental tax expense as described above.

On a quarterly basis, Management expects 2018 operating results to reflect a profile similar to 2017 and previous years, with revenues and EPS being more second-half weighted. As with past years, projected second half 2018 sales and EPS are expected to be significantly stronger than the first half.

Management expects Q1 2018 GAAP EPS to be in the range of $0.28 to $0.33 per share. The timing of quarterly sales and earnings throughout the year, coupled with higher non-cash charges within the respective quarters impacts comparability in Q1.

Mr. Richey continued, "Given the expected contribution from our recent acquisitions, coupled with current expectations of organic growth from "legacy" operations, I believe 2018 reflects solid sales, EBIT, EBITDA and EPS growth and positions us well to meet or exceed our shareholder value-creation goals.

"We ended 2017 in a favorable position given our strong backlog and balance sheet, and as we enter the new year, I am very comfortable with our outlook. Our core businesses remain solid and the acquisitions are nearly fully integrated and are contributing at a meaningful level. We enter 2018 with numerous growth opportunities throughout our operating segments as described above.

"I'm especially excited by our growth outlook in Test, where we've worked diligently for the past few years on right-sizing the cost structure and enhancing operating efficiency to allow it to be more competitive and significantly more profitable. Test's current backlog firmly supports our outlook, and I'm happy to report that we were recently notified of two new large chamber wins totaling $30 million from globally recognized customers in the government / defense and automotive markets.

"Additionally, at Westland, we were recently awarded a large, multi-year contract to supply next-generation technology protecting naval vessels in support of our long-term outlook for this growing platform.

"Our market leadership positions and the breadth and diversity of our new product offerings will allow us to continue to grow at levels above our peer averages. Our management teams' focus on profitable growth and ROIC will remain steadfast as we believe these are the key drivers of continued and sustainable share price appreciation."

The Company will host a conference call today, November 14, at 4:00 p.m. Central Time, to discuss the Company's 2017 results. A live audio webcast will be available on the Company's website at www.escotechnologies.com. Please access the website at least 15 minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available for seven days on the Company's website noted above or by phone (dial 1-855-859-2056 and enter the pass code 96067789).

Statements in this press release regarding the Company's expected quarterly, 2018 full year and beyond results, revenue and sales growth, EPS, EPS growth, EBIT, EBITDA, Adjusted EBITDA, gross profit, interest expense, non-cash depreciation and amortization of intangibles, corporate costs, effective tax rates, the Company's ability to increase operating margins, realize financial goals and increase shareholder value, the success of acquisition efforts, the size, number and timing of future sales and growth opportunities, the long-term success of the Company, and any other statements which are not strictly historical are "forward-looking" statements within the meaning of the safe harbor provisions of the federal securities laws.

Investors are cautioned that such statements are only predictions and speak only as of the date of this release, and the Company undertakes no duty to update them except as may be required by applicable laws or regulations. The Company's actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company's operations and business environment including, but not limited to those described in Item 1A, "Risk Factors", of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2016, and the following: the success of the Company's competitors; weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; delivery delays or defaults by customers; material changes in the costs and availability of certain raw materials; the appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts; the timing and content of future contract awards or customer orders; performance issues with key customers, suppliers and subcontractors; labor disputes; the impacts of natural disasters on the Company's operations and those of the Company's customers and suppliers; changes in laws and regulations, including but not limited to changes in accounting standards and taxation requirements; changes in interest rates; costs relating to environmental matters arising from current or former facilities; financial exposure in connection with Company guarantees of certain Aclara contracts; the availability of select acquisitions; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the success and integration of recently acquired businesses.

The financial measures EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are presented in this press release. The Company defines "EBIT" as earnings before interest and taxes, "EBITDA" as earnings before interest, taxes, depreciation and amortization, "Adjusted EBITDA" as EBITDA excluding certain defined non-recurring charges, and "Adjusted EPS" as GAAP earnings per share (EPS) excluding the non-recurring charges described above which were $0.05 per share for Q4 2017 and $0.02 per share for Q4 2016.

EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes that EBIT, EBITDA and Adjusted EBDITDA are useful in assessing the operational profitability of the Company's business segments because they exclude interest, taxes, depreciation and amortization, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by Management in determining resource allocations within the Company as well as incentive compensation. The Company believes that the presentation of EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

ESCO, headquartered in St. Louis: Manufactures highly-engineered filtration and fluid control products for the aviation, space and process markets worldwide; is the industry leader in RF shielding and EMC test products; provides diagnostic instruments, software and services for the benefit of industrial power users and the electric utility and renewable energy industries; and, produces custom thermoformed packaging, pulp-based packaging, and specialty products for medical and commercial markets. Further information regarding ESCO and its subsidiaries is available on the Company's website at www.escotechnologies.com.

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