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): August 7, 2008
ESCO TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Charter)
Missouri 1-10596 43-1554045
(State or Other (Commission (I.R.S. Employer
Jurisdiction of Incorporation) File Number) Identification No.)
9900A Clayton Road, St. Louis, Missouri 63124-1186
(Address of Principal Executive Offices) (Zip Code)
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))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Today, August 7, 2008, the Registrant is issuing a press release (furnished
herewith as Exhibit 99.1 to this report) announcing its fiscal year 2008 third
quarter financial and operating results. See Item 7.01, Regulation FD Disclosure
below.
ITEM 7.01 REGULATION FD DISCLOSURE
Today, the Registrant is issuing a press release (Exhibit 99.1) announcing its
fiscal year 2008 third quarter financial and operating results. 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 website located at
http://www.escotechnologies.com. It can be viewed through the "Investor
Relations" page of the website under the tab "Press Releases," although the
Registrant reserves the right to discontinue that availability at any time.
NON-GAAP FINANCIAL MEASURES
The press release furnished herewith as Exhibit 99.1 contains financial measures
and financial terms not calculated in accordance with generally accepted
accounting principles in the United States of America ("GAAP") in order to
provide investors and management with an alternative method for assessing the
Registrant's operating results in a manner that is focused on the performance of
the Registrant's ongoing operations. The Registrant has provided definitions
below for the non-GAAP financial measures utilized in the press release,
together with an explanation of why management uses these measures, and why
management believes that these non-GAAP financial measures are useful to
investors. The press release uses the non-GAAP financial measures of "EBIT",
"EBIT margin" and expected 2008 "EPS-Adjusted Basis".
The Registrant defines "EBIT" as earnings before interest and taxes from
continuing operations. The Registrant defines "EBIT margin" as EBIT as a percent
of net sales. The Registrant's management evaluates the performance of its
operating segments based on EBIT and EBIT margin, and believes that EBIT and
EBIT margin are useful to investors to demonstrate the operational profitability
of the Registrant's business segments by excluding interest and taxes, which are
generally accounted for across the entire Registrant on a consolidated basis.
EBIT is also one of the measures used by management in determining resource
allocations within the Registrant and incentive compensation.
The press release refers to expected 2008 "EPS-Adjusted Basis" and EPS from
continuing operations adjusted for "intangible asset amortization and inventory
step-up" exclusive of pre-tax intangible asset amortization expense related to
TWACS NG software, purchase accounting intangible assets related to the
Registrant's acquisitions within the past three years and the expense related to
the purchase accounting step-up of Doble Engineering Company inventory. The
Registrant believes that the presentation of these operational measures provides
important supplemental information to investors regarding financial and business
trends relating to the Registrant's financial condition and results of
operations. The Registrant's management believes that these measures provide an
alternative method for assessing the Registrant's expected future performance
that is useful because they facilitate comparisons with other companies in the
Utility Solutions Group segment industry, many of which use similar non-GAAP
financial measures to supplement their GAAP results. The Registrant provides
this information to investors to enable them to perform additional analyses of
present and future operating performance, compare the Registrant to other
companies, and evaluate the Registrant's ongoing financial operations.
The presentation of the information described above is intended to supplement
investors' understanding of the Registrant's operating performance. The
Registrant's non-GAAP financial measures may not be comparable to other
companies' non-GAAP financial performance measures. Furthermore, these measures
are not intended to replace net earnings (loss), cash flows, financial position,
comprehensive income (loss), or any other measure as determined in accordance
with GAAP.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. Description of Exhibit
99.1 Press Release dated August 7, 2008
OTHER MATTERS
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.
SIGNATURE
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.
ESCO TECHNOLOGIES INC.
Dated: August 7, 2008 By: /s/ G.E. Muenster
G.E. Muenster
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Press Release dated August 7, 2008
Exhibit Number 99.1
NEWS FROM ESCO TECHNOLOGIES
For more information contact: For media inquiries:
Patricia K. Moore David P. Garino
Director, Investor Relations (314) 982-0551
ESCO Technologies Inc.
(314) 213-7277
ESCO ANNOUNCES THIRD QUARTER RESULTS
ST. LOUIS, August 7, 2008 - ESCO Technologies Inc. (NYSE: ESE) today
announced its results for the third quarter ended June 30, 2008.
Within this release, references to "quarters" and "year-to-date" relate to
the fiscal quarters and nine-month periods ended June 30 for the respective
fiscal years noted.
Net earnings and EPS are presented from "Continuing Operations" and
"Discontinued Operations." Continuing Operations represent the results of the
ongoing businesses of the Company, including the results of Doble for the
seven-month period subsequent to its November 30, 2007 acquisition. Discontinued
Operations represent the results of the filtration portion of Filtertek which
was sold on November 25, 2007.
Third Quarter 2008 vs. 2007 Highlights - Continuing Operations
- --------------------------------------------------------------
o Net sales increased $42.3 million, or 36.7 percent, to $157.7 million.
o EBIT dollars increased $8.5 million, or 72.8 percent, to $20.2 million.
o Total depreciation and amortization expense was $7.2 million compared to $4.3
million.
o Pretax earnings include $4.2 million ($0.10 per share, after tax) of
amortization expense related to TWACS NG software and purchase accounting
related assets in the 2008 third quarter compared to $2.3 million ($0.05 per
share, after tax) in 2007's third quarter.
o Pretax earnings were impacted by $2.6 million of interest expense in 2008
compared to $0.1 million of interest income in 2007.
o The effective tax rate was 24.4 percent in the 2008 third quarter compared to
33.3 percent in the third quarter of 2007 as explained in the "Effective Tax
Rate" section below.
o EPS from Continuing Operations increased 66.7 percent to $0.50 per share (or
$0.60 per share adjusted for the $0.10 per share of software and purchase
accounting amortization noted above), compared to $0.30 per share in 2007.
o Net debt outstanding was $207.7 million at June 30, 2008.
o Entered orders were $159.1 million with a book-to-bill ratio of 101 percent.
Year-to-Date 2008 vs. 2007 Highlights - Continuing Operations
- -------------------------------------------------------------
o Net sales increased $123.0 million, or 40.3 percent, to $427.8 million.
o EBIT dollars increased $28.2 million, or 148.4 percent, to $47.1 million.
o Total depreciation and amortization expense was $19.9 million compared to
$12.1 million.
o Pretax earnings include $12.5 million ($0.30 per share, after tax) of
amortization expense related to TWACS NG software and purchase accounting
related assets in 2008 compared to $6.1 million ($0.14 per share, after tax)
in 2007.
o Pretax earnings were impacted by $7.1 million of interest expense in 2008
compared to $0.6 million of interest income in 2007.
o The effective tax rate was 31.8 percent in 2008 compared to 21.0 percent in
2007 as explained in the "Effective Tax Rate" section below.
o EPS from Continuing Operations was $1.04 per share (or $1.34 per share as
adjusted for the $0.30 per share of software and purchase accounting
amortization noted above), compared to $0.58 per share in 2007.
o Net cash generated by operating activities - continuing operations was $51.2
million.
o Entered orders were $453.5 million with a book-to-bill ratio of 106 percent.
Diluted EPS Summary Third Quarter Year-to-Date
- ------------------- ------------- ------------
2008 2007 2008 2007
---- ---- ---- ----
Continuing Operations $ 0.50 0.30 1.04 0.58
Discontinued Operations -- 0.03 (0.19) 0.07
---- ---- ------ ----
Net Earnings $ 0.50 0.33 0.85 0.65
==== ==== ==== ====
Sales
- -----
Third quarter 2008 sales of $157.7 million were 36.7 percent higher than
third quarter 2007 sales of $115.4 million, and year-to-date sales increased
40.3 percent to $427.8 million compared to $304.8 million in 2007.
Utility Solutions Group sales of $93.7 million increased $39.7 million, or
73.6 percent in the 2008 third quarter compared to the third quarter of 2007,
primarily driven by $20.9 million of sales from Doble in the 2008 third quarter.
Fixed network RF AMI sales increased $17.8 million, or 165 percent, primarily
due to higher gas AMI deliveries at PG&E. Fixed network power-line system (PLS)
AMI sales decreased $5.0 million, or 12.7 percent, driven by lower sales to IOU
customers (primarily in Texas), partially offset by a 3.0 percent increase in
deliveries to COOP and public power (Municipal) customers which totaled $30.5
million during the 2008 third quarter. Software sales and sales of digital video
security products increased $6.0 million in the third quarter of 2008.
Year-to-date 2008 sales of $247.5 million increased $114.3 million, or 85.8
percent, driven by Doble's sales of $52.0 million; an RF AMI sales increase of
$33.9 million, or 111.9 percent; PLS AMI sales increase of $24.9 million, or
28.0 percent; and a $3.5 million increase in sales of software and digital video
security products.
Test segment sales of $33.0 million in the 2008 third quarter
decreased slightly from the $34.6 million of sales recognized in the third
quarter of 2007. This decrease is due to the timing of ongoing domestic chamber
deliveries and slower than expected installations. Year-to-date, Test segment
sales increased slightly over prior year.
Filtration segment sales of $31.0 million increased $4.1 million, or 15.4
percent in the third quarter of 2008, and year-to-date, Filtration sales
increased $6.7 million, or 9.0 percent. Sales increased across all product lines
with particularly strong results recognized in the aerospace end-markets.
Earnings Before Interest and Taxes (EBIT)
- -----------------------------------------
On a segment basis, items that impacted EBIT dollars and EBIT as a percent
of sales ("EBIT margin") during the third quarter of fiscal 2008 included the
following:
In the Utility Solutions Group, EBIT for the 2008 third quarter was $17.7
million (18.9 percent of sales), compared to $8.6 million (15.9 percent of
sales) in the 2007 third quarter. The $9.1 million increase in EBIT dollars and
as a percent of sales in the 2008 third quarter was the result of the
significant sales increases across the segment as noted above. The 2008 third
quarter also included higher TWACS NG software amortization compared to the 2007
third quarter ($2.9 million compared to $1.8 million). Year-to-date, 2008 EBIT
was $41.5 million (16.8 percent of sales) compared to $11.9 million (8.9 percent
of sales) with the significant increase in dollars and percentage being driven
by the 86 percent increase in year-to-date sales within this segment.
In the Test segment, EBIT was $2.8 million (8.5 percent of sales) and $7.5
million (7.6 percent of sales) for the 2008 third quarter and nine months,
respectively, compared to the 2007 third quarter and year-to-date EBIT of $2.0
million (5.9 percent of sales) and $8.2 million (8.5 percent of sales),
respectively. The 2008 year-to-date EBIT included approximately $0.9 million of
non-recurring costs associated with the facility consolidation in Austin, Texas.
Additionally, year-to-date EBIT margins were lower due in 2008 due to changes in
sales mix involving additional large chambers and fewer high-margin components
sold versus 2007.
In the Filtration segment, 2008 third quarter EBIT was $5.2 million (16.8
percent of sales) compared to $5.5 million (20.5 percent of sales) in the prior
year third quarter. The decrease in EBIT dollars and margin is due to sales mix
changes at VACCO where fewer high margin defense spares were sold in the 2008
third quarter. Year-to-date, 2008 EBIT was $13.8 million (16.9 percent of sales)
compared to 2007 EBIT of $12.7 million (16.9 percent of sales).
Corporate operating costs included in EBIT were $5.5 million and $15.7
million in the third quarter and nine months of 2008, respectively, compared to
$4.4 million and $13.9 million in the 2007 third quarter and nine months,
respectively. The 2008 increases are due to lower royalty income and higher
amortization expenses related to purchase accounting identifiable intangible
assets recorded at Corporate.
Effective Tax Rate
- ------------------
The effective tax rate from Continuing Operations in the third quarter of
2008 was 24.4 percent compared to 33.3 percent in the third quarter of 2007, and
31.8 percent compared to 21.0 percent for the nine month periods of 2008 and
2007, respectively. The 2008 and 2007 tax rates were favorably benefited by
various tax credits (i.e., export related benefits, research credits).
The tax benefit recognized in 2008 resulted from an analysis and amendment
of Federal income tax returns for the fiscal years 2001 through 2006.
New Orders
- ----------
New orders received in 2008 were $159.1 million for the third quarter, and
$453.5 million year-to-date resulting in a backlog at June 30, 2008 of $283.3
million.
New orders received were $96.4 million in the Utility Solutions Group,
$34.1 million in Test, and $28.6 million in Filtration during the third quarter
of 2008.
Orders from PG&E during the 2008 third quarter were $31.0 million,
including $4.7 million related to the RF electric AMI order announced in May
2008. Subsequent to the third quarter end, the Company recorded an additional
$7.8 million of PG&E gas orders related to its AMI deployment, resulting in
year-to-date PG&E orders of $85.3 million. Total PG&E firm order quantities
since inception are 2.2 million units (1.6 million gas and 0.6 million electric)
and $140.0 million.
While not included in the order amounts noted above, the Company previously
announced that its AMI technology has been selected by Idaho Power (estimated at
500,000 power-line system electric units, $25 million), New York City Water
(estimated at 875,000 RF water units, $68.3 million), and Baltimore Gas &
Electric (selected for RF pilot for gas and electric trial).
Also subsequent to June 30, the Company announced that its Test segment was
awarded one of the largest contracts in its history. ETS-Lindgren signed a $16.7
million contract with the National Automotive Testing and R&D Infrastructure
Project (NATRIP) in India to provide two automotive test chambers to support
India's most significant automotive initiative undertaken to date.
Cash
- ----
Net cash provided by operating activities from Continuing Operations was
$51.2 million for the nine months ended June 30, 2008. At June 30, 2008, the
Company had $22.8 million in cash and $230.5 million of total debt outstanding
for a net debt position of $207.7 million.
Doble Purchase Accounting Items
- -------------------------------
The annual pretax amortization charge related to Doble's identifiable
intangible assets is expected to be approximately $3.3 million for five years,
decreasing to $2.7 million for the remaining 15 years.
Regarding tangible assets, Doble's finished goods inventory was required to
be "stepped up" under purchase accounting by $1.7 million, which results in
finished goods inventory being sold with no profit recognized. This results in
positive cash flow, but "lost" profit of $1.3 million in fiscal 2008 and $0.4
million in fiscal 2009.
Chairman's Commentary
- ---------------------
Vic Richey, Chairman and Chief Executive Officer, commented, "I am very
pleased with our operating performance this year as our growth in sales,
earnings and entered orders continues to demonstrate ESCO's significant
resiliency against a challenging economic backdrop. We continue to operate at a
level well above last year's sales, EBIT, EPS, cash flow, and entered orders.
Our success in 2008 is evidenced by the double-digit growth percentages noted
throughout our financials.
"Our Utility Solutions Group continues to exceed our original expectations
established at the beginning of the year, and considering all of our recent
order activity and our AMI selections at Idaho Power, New York City and others,
I'm very enthused about the way that our future outlook is shaping up. This
momentum leads me to believe that our Aclara brand is gaining widespread
acceptance in the market.
"Drilling down further on the AMR / AMI front, I continue to be very
excited about the increasing opportunities that we are addressing in the
international marketplace. The amount of international piloting activity
continues to expand both in numbers of utilities expressing interest in our AMI
technology, and in new countries which have come forward with requests for
information about Aclara's solution. I remain confident that some of these
trials will ultimately lead to initial deployments over the next 12 months.
"Doble continues to perform at an exceptional level and we expect it to
continue this pattern of growth and profitability well into the future. We
continue our plan to further Doble's presence in the international market, and
we have validated this strategy with our recent acquisition of LDIC announced
this week."
Mr. Richey concluded, "I am more confident than ever that our strategy to
drive organic growth across all operating segments through new product
development and attention to costs, and supplemented by acquisition activity to
allow us to further enhance our market presence, will continue to be a
significant contributor to our stated goal of increasing long-term shareholder
value."
Business Outlook
- ----------------
Statements contained in the preceding and following paragraphs are based on
current expectations. Statements that are not strictly historical are considered
forward-looking, and actual results may differ materially.
The Business Outlook described below excludes the Discontinued Operations
of Filtertek and the impact of any future acquisitions or divestitures, and
includes: the expected operating results of Doble for the 10 months of
operations included in fiscal 2008 since the date of acquisition; the impact of
the amortization of identifiable intangible purchase accounting assets related
to Aclara Software, Aclara RF, and Doble; the impact of the Doble inventory
step-up resulting in "lost" profit, and the amortization of the TWACS NG
software.
PG&E Contract
- -------------
PG&E's ongoing technology assessment activities may impact the timing and /
or receipt of future orders from PG&E for its electric deployment, and until
PG&E completes this evaluation and determines whether it will modify its AMI
project plan, the Company cannot reasonably estimate the timing or total value
of equipment orders that may be received.
The Company has been in ongoing negotiations with PG&E related to a further
deployment of its Aclara RF electric AMI product.
Additionally, the Company is in negotiations with PG&E related to its
existing power-line systems (PLS) contract to amend and redefine the remaining
financial and performance obligations of both parties.
The gas portion of the PG&E contract is continuing to be deployed using
Aclara RF's fixed network solution.
Revenue, EBIT Margins, and Earnings Per Share - 2008
- ----------------------------------------------------
Management continues to expect fiscal year 2008 revenues and EBIT margins
to be consistent with the ranges described in detail in the Company's February
7, 2008 release, and as reiterated in the May 6, 2008 release. Management has
narrowed the range of EPS expectations as noted below.
Fiscal 2008 EPS is expected to be within the following ranges:
EPS - GAAP Continuing Operations $ 1.80 to 1.85
Add: Intangible Asset Amortization and
Inventory Step-Up $ 0.42 0.42
------- ----
EPS - Adjusted Basis $ 2.22 to 2.27
======= ====
As explained in the February 7, 2008 release, the $0.42 per share noted in
the above reconciliation includes TWACS NG software amortization, purchase
accounting intangible asset amortization related to the Company's recent
acquisitions, and Doble's purchase accounting inventory step-up.
Additionally, interest expense for 2008, which is included in the GAAP EPS
amounts noted above, is expected to be in the range of $0.24 to $0.26 per share,
and stock option expense is expected to be in the range of $0.08 to $0.10 per
share for the year. The effective annual tax rate for fiscal 2008 is expected to
be approximately 33 to 35 percent.
Conference Call
- ---------------
The Company will host a conference call today, August 7, at 4 p.m., Central
Time, to discuss the Company's third quarter operating results. A live audio
webcast will be available on the Company's web site at www.escotechnologies.com.
Please access the web site 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 web site noted above or
by phone (dial 1-888-203-1112 and enter the pass code 9697543).
Forward-Looking Statements
- --------------------------
Statements in this press release regarding the amounts and timing of fiscal
2008 future revenues, results, earnings, sales, EBIT, EPS, sales and EBIT
margins, the success of product development and cost reduction efforts,
estimated order quantities under newly-awarded AMI contracts, the amortization
of Doble's intangible assets, future acquisitions, the fiscal 2008 effective
annual tax rate, future revenues from Doble, the success of international AMR /
AMI pilots and the likelihood of resulting international AMR / AMI deployments,
the long-term success of the Company, and any other written or oral 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. 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: the risk factors described in Item 1A of the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 2007, and in
Part II, Item 1A of the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 2008; actions by the California Public Utility
Commission; PG&E's Board of Directors or PG&E's Management impacting PG&E's AMI
projects; the outcome of PG&E's evaluation of other technologies to meet their
requirements for the electric portion of its service territory; the timing and
terms of the PLS contract amendment; the success of the Company's competitors;
changes in or the effect of the Federal Energy Bill; the timing and content of
purchase order releases under the Company's AMI contracts; the Company's
successful performance of its AMI contracts; site readiness issues with Test
segment customers; weakening of economic conditions in served markets; changes
in customer demands or customer insolvencies; competition; intellectual property
rights; technical difficulties; unforeseen charges impacting corporate operating
expenses; the performance of the Company's international operations; material
changes in the costs of certain raw materials including steel and copper;
delivery delays or defaults by customers; termination for convenience of
customer contracts; timing and magnitude of future contract awards; containment
of engineering and development costs; performance issues with key customers,
suppliers and subcontractors; labor disputes; changes in laws and regulations
including but not limited to changes in accounting standards and taxation
requirements; costs relating to environmental matters; uncertainty of disputes
in litigation or arbitration; the Company's successful execution of internal
operating plans; and the integration of newly acquired businesses.
ESCO, headquartered in St. Louis, is a proven supplier of special purpose
utility solutions for electric, gas and water utilities, including hardware and
software to support advanced metering applications and fully automated
intelligent instrumentation. In addition, the Company provides engineered
filtration products to the aviation, space and process markets worldwide and is
the industry leader in RF shielding and EMC test products. Further information
regarding ESCO and its subsidiaries is available on the Company's web site at
www.escotechnologies.com.
- tables attached -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Three Months Ended
------------------ ------------------
June 30, 2008 June 30, 2007
------------- -------------
Net Sales $ 157,669 115,365
Cost and Expenses:
Cost of sales 93,563 70,603
SG&A 38,829 27,865
Amortization of intangible assets 4,575 2,739
Interest expense (income) 2,589 (131)
Other expenses, net 508 2,473
------- -------
Total costs and expenses 140,064 103,549
------- -------
Earnings before income taxes 17,605 11,816
Income taxes 4,297 3,937
----- -----
Net earnings from continuing
operations 13,308 7,879
Earnings from discontinued
operations, net of tax expense
of $475 - 975
------ -----
Net earnings $ 13,308 8,854
========= =====
Earnings per share:
Basic
Continuing operations 0.51 0.30
Discontinued operations 0.00 0.04
---- ----
Net earnings $ 0.51 0.34
========= ====
Diluted
Continuing operations 0.50 0.30
Discontinued operations 0.00 0.03
---- ----
Net earnings $ 0.50 0.33
========= ====
Average common shares O/S:
Basic 25,977 25,941
====== ======
Diluted 26,402 26,493
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended Nine Months Ended
----------------- -----------------
June 30, 2008 June 30, 2007
------------- -------------
Net Sales $ 427,785 304,812
Cost and Expenses:
Cost of sales 255,838 193,315
SG&A 111,885 83,056
Amortization of intangible assets 12,770 7,557
Interest expense (income) 7,135 (628)
Other expenses, net 157 1,909
------- --------
Total costs and expenses 387,785 285,209
------- -------
Earnings before income taxes 40,000 19,603
Income taxes 12,705 4,122
------ -----
Net earnings from continuing
operations 27,295 15,481
(Loss) earnings from discontinued
operations, net of tax expense of
$325 and $868, respectively (115) 1,610
Loss on sale of discontinued
operations, net of tax of $4,809 (4,974) -
------ ------
Net (loss) earnings from
discontinued operations (5,089) 1,610
Net earnings $ 22,206 17,091
========= ======
Earnings per share:
Basic
Continuing operations 1.06 0.60
Discontinued operations (0.20) 0.06
----- ----
Net earnings $ 0.86 0.66
========= ====
Diluted
Continuing operations 1.04 0.58
Discontinued operations (0.19) 0.07
----- ----
Net earnings $ 0.85 0.65
========= ====
Average common shares O/S:
Basic 25,862 25,904
====== ======
Diluted 26,290 26,482
====== ======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
-------- --------
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
- ---------
Utility Solutions
Group $ 93,653 53,943 247,533 133,203
Test 33,039 34,583 98,599 96,678
Filtration 30,977 26,839 81,653 74,931
------ ------ ------ ------
Totals $157,669 115,365 427,785 304,812
======== ======= ======= =======
EBIT
- ----
Utility Solutions
Group $ 17,666 8,564 41,540 11,891
Test 2,794 2,042 7,526 8,246
Filtration 5,216 5,509 13,778 12,710
Corporate (5,482) (1) (4,430) (2) (15,709) (3) (13,872) (4)
------ ------ ------- -------
Consolidated EBIT 20,194 11,685 47,135 18,975
Interest (expense)/
income (2,589) 131 (7,135) 628
------ --- ------ ---
Earnings before
income taxes $ 17,605 11,816 40,000 19,603
======== ====== ====== ======
Note: Depreciation and amortization expense was $7.2 million and
$4.3 million for the quarters ended June 30, 2008 and 2007,
respectively, and $19.9 million and $12.1 million for the
nine-month periods ended June 30, 2008 and 2007, respectively.
(1) Includes $1.2 million of amortization of acquired intangible assets.
(2) Includes $0.5 million of amortization of acquired intangible assets.
(3) Includes $3.0 million of amortization of acquired intangible assets.
(4) Includes $1.7 million of amortization of acquired intangible assets.
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
June 30, September 30,
2008 2007
---- ----
Assets
- ------
Cash and cash equivalents $ 22,817 18,638
Accounts receivable, net 113,904 85,319
Costs and estimated earnings
on long-term contracts 8,676 11,520
Inventories 71,038 55,885
Current portion of deferred
tax assets 13,407 25,264
Other current assets 15,770 28,054
Current assets from discontinued
operations - 35,670
------- -------
Total current assets 245,612 260,350
Property, plant and equipment, net 74,341 50,193
Goodwill 320,298 124,757
Intangible assets, net 237,173 74,624
Other assets 14,181 10,338
Other assets from discontinued
operations - 55,845
-------- -------
$891,605 576,107
======== =======
Liabilities and Shareholders' Equity
- ------------------------------------
Short-term borrowings and current
portion of long-term debt $ 30,474 -
Accounts payable 41,647 45,726
Current portion of deferred revenue 18,980 24,621
Other current liabilities 44,011 31,859
Current liabilities from discontinued
operations - 16,994
------- -------
Total current liabilities 135,112 119,200
Long-term portion of deferred revenue 9,361 4,514
Deferred tax liabilities 81,245 18,522
Other liabilities 18,327 15,854
Long-term debt 200,000 -
Other liabilities from discontinued
operations - 2,534
Shareholders' equity 447,560 415,483
------- -------
$891,605 576,107
======== =======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
June 30, 2008
-------------
Cash flows from operating activities:
Net earnings $ 22,206
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Net loss from discontinued operations 5,089
Depreciation and amortization 19,898
Stock compensation expense 3,230
Changes in operating working capital (9,457)
Effect of deferred taxes 9,166
Change in deferred revenues and costs, net 326
Other 693
---
Net cash provided by operating activities -
continuing operations 51,151
Net loss from discontinued operations (5,089)
Net cash provided by discontinued operations 1,412
-----
Net cash used by operating activities -
discontinued operations (3,677)
------
Net cash provided by operating activities 47,474
------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (330,796)
Proceeds from sale of marketable securities 4,966
Additions to capitalized software (9,225)
Capital expenditures - continuing operations (12,618)
-------
Net cash used by investing activities -
continuing operations (347,673)
Capital expenditures - discontinued operations (1,126)
Proceeds from divestiture of business, net -
discontinued operations 74,370
------
Net cash provided by investing activities -
discontinued operations 73,244
------
Net cash used by investing activities (274,429)
--------
Cash flows from financing activities:
Proceeds from long-term debt 276,197
Principal payments on long-term debt (45,723)
Debt issuance costs (2,965)
Net decrease in short-term borrowings -
discontinued operations (2,844)
Excess tax benefit from stock options exercised 737
Other (including proceeds from exercise of
stock options) 5,732
-----
Net cash provided by financing activities 231,134
-------
Net increase in cash and cash equivalents 4,179
Cash and cash equivalents, beginning of period 18,638
------
Cash and cash equivalents, end of period $ 22,817
=========
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered
- ------------------- Utility
Orders-Q3 FY 2008 Solutions Test Filtration Total
- ----------------- --------- ---- ---------- -----
Beginning Backlog -
3/31/08 continuing
operations $ 136,180 60,299 85,388 281,867
Entered Orders 96,401 34,142 28,551 159,094
Sales (93,653) (33,039) (30,977) (157,669)
------- ------- ------- --------
Ending Backlog-6/30/08 $ 138,928 61,402 82,962 283,292
========= ====== ====== =======
Backlog And Entered
- ------------------- Utility
Orders-Q3 YTD 2008 Solutions Test Filtration Total
- ------------------ --------- ---- ---------- -----
Beginning Backlog -
9/30/07 continuing
operations $ 123,176 60,038 74,394 257,608
Entered Orders 263,285 99,963 90,221 453,469
Sales (247,533) (98,599) (81,653) (427,785)
-------- ------- ------- --------
Ending Backlog-6/30/08 $ 138,928 61,402 82,962 283,292
========= ====== ====== =======
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