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): May 6, 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)
Registrants 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, May 6, 2008, the Registrant is issuing a press release (furnished
herewith as Exhibit 99.1 to this report) announcing its fiscal year 2008 second
quarter financial and operating results. See Item 7.01, Regulation FD Disclosure
below.
ITEM 7.01 REGULATION FD DISCLOSURE
Today, the Registrant is issuing (i) a press release (Exhibit 99.1) announcing
its fiscal year 2008 second quarter financial and operating results, and (ii) a
second press release (Exhibit 99.2) announcing that in April 2008 Pacific Gas
and Electric Company (PG&E) placed follow-on orders totaling $11.1 million for
additional Aclara advanced metering infrastructure (AMI) products. 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 "software and purchase accounting
amortization" exclusive of pre-tax intangible asset amortization expense related
to TWACS NG software, purchase accounting intangible assets related to the
Registrant's recent acquisitions 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 8.01 Other Events
Today, the Registrant is issuing a second press release (furnished herewith as
Exhibit 99.2 to this report) announcing that in April 2008 PG&E placed follow-on
orders totaling $11.1 million for additional Aclara AMI products. See Item 7.01,
Regulation FD Disclosure above.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. Description of Exhibit
99.1 Press Release dated May 6, 2008
99.2 Press Release dated May 6, 2008
OTHER MATTERS
The information in this report furnished pursuant to Item 2.02 and Item 7.01,
including Exhibit 99.1 and Exhibit 99.2, 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: May 6, 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 May 6, 2008
99.2 Press Release dated May 6, 2008
Exhibit 99.1
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 SECOND QUARTER RESULTS
ST. LOUIS, May 6, 2008 - ESCO Technologies Inc. (NYSE: ESE) today announced
its results for the second quarter ended March 31, 2008, and also reaffirmed its
full year earnings per share (EPS) guidance.
Within this release, references to "quarters" and "year-to-date" relate to
the fiscal quarters and six-month periods ended March 31 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
four-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.
Second Quarter 2008 vs. 2007 Summary - Continuing Operations
o Net sales increased $26.3 million, or 24.2 percent, to $135.2 million.
o EBIT dollars increased $2.1 million, or 19.2 percent, to $12.9
million.
o Total depreciation and amortization expense was $7.0 million compared
to $4.3 million.
o Pretax earnings include $3.5 million ($0.08 per share, after tax) of
amortization expense related to TWACS NG software and purchase
accounting related assets.
o Pretax earnings were impacted by $3.2 million of interest expense in
2008 compared to $0.2 million of interest income in 2007.
o The effective tax rate was 37.3 percent in the 2008 second quarter
compared to 18.5 percent (including the effect of research tax
credits) in the second quarter of 2007.
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Add One
o EPS from Continuing Operations was $0.23 per share (or $0.31 per share
adjusted for the $0.08 per share of software and purchase accounting
amortization noted above), compared to $0.34 per share in 2007, with
the decrease due to higher interest expense and a higher tax rate in
2008.
o Net cash generated during the second quarter was $21.8 million.
o Entered orders were $164.1 million with a book-to-bill ratio of 121
percent.
Six Months 2008 Year-to-Date Summary - Continuing Operations
o Net sales increased $80.7 million, or 42.6 percent, to $270.1 million.
o EBIT dollars increased $19.7 million, or 270 percent, to $26.9
million.
o Total depreciation and amortization expense was $12.7 million compared
to $7.8 million.
o Pretax earnings include $8.3 million ($0.20 per share, after tax) of
amortization expense related to TWACS NG software and purchase
accounting related assets.
o Pretax earnings were impacted by $4.5 million of interest expense in
2008 compared to $0.5 million of interest income in 2007.
o The effective tax rate was 37.5 percent in 2008 compared to 2.4
percent (including the effect of research credits and loss in first
quarter) in 2007.
o EPS from Continuing Operations was $0.53 per share (or $0.73 per share
as adjusted for the $0.20 per share of software and purchase
accounting amortization noted above), compared to $0.29 per share in
2007.
o Net cash generated year-to-date was $19.8 million.
o Entered orders were $294.4 million with a book-to-bill ratio of 109
percent.
Discontinued Operations Summary
Discontinued Operations had no impact on the 2008 second quarter, and
contributed $0.7 million, or $0.02 per share, to the 2007 second quarter.
The sale of Filtertek in the first quarter of 2008 resulted in a
year-to-date net loss of $5.1 million, or $0.19 per share, from Discontinued
Operations driven by the write-down of the vacated Puerto Rico property and by
income tax expense related to its foreign operations.
The divestiture of Filtertek, net of transaction costs, generated $75.5
million of net cash. The Puerto Rico property was sold on March 31, 2008 for
$1.4 million with the net cash proceeds of $1.3 million being received on April
1, 2008.
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Add Two
2nd Quarter Year-to-Date
----------- ------------
Earnings Per Share Summary
- --------------------------
2008 2007 2008 2007
---- ---- ---- ----
Continuing Operations $ 0.23 0.34 $ 0.53 0.29
Discontinued Operations -- 0.02 (0.19) 0.02
---- ---- ----- ----
Net Earnings $ 0.23 0.36 $ 0.34 0.31
====== ==== ====== ====
Sales
Second quarter 2008 sales of $135.2 million were 24.2 percent higher than
second quarter 2007 sales of $108.9 million, and year-to-date sales increased
42.6 percent to $270.1 million compared to $189.4 million in 2007. Fiscal 2008
year-to-date sales include the recognition of $20.5 million of revenue in the
first quarter related to electric AMI shipments to PG&E which occurred with the
delivery of TWACS NG software version 3.0 in December 2007.
Utility Solutions Group sales of $74.6 million increased $25.3 million, or
51.5 percent in the 2008 second quarter compared to the second quarter of 2007,
primarily driven by $21.7 million of sales from Doble in the 2008 second
quarter. Fixed network RF AMI sales increased $5.1 million, or 43.1 percent,
primarily due to higher gas AMI deliveries at PG&E. Fixed network power-line
system (PLS) AMI sales decreased $1.8 million, or 5.3 percent, driven by lower
sales to IOU customers (primarily in Texas), partially offset by a 22.4 percent
increase in deliveries to COOP and public power (Municipal) customers which
totaled $29.0 million during the 2008 second quarter. Software sales and sales
of digital video security products increased $0.3 million in the second quarter
of 2008. Year-to-date 2008 sales of $153.9 million increased $74.6 million, or
94.1 percent, driven by Doble's sales of $31.1 million; an RF AMI sales increase
of $16.2 million, or 82.6 percent; and a PLS AMI sales increase of $29.8
million, or 60.2 percent, partially offset by a $2.5 million decrease in sales
of digital video security products.
Test segment sales of $33.5 million in the 2008 second quarter decreased
slightly from the $34.0 million of sales recognized in the second quarter of
2007. This decrease is a result of the timing of domestic chamber deliveries
which are expected to be completed in the second half of fiscal 2008.
Year-to-date, Test segment sales increased 5.4 percent, driven by the continued
strength of the international end markets.
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Add Three
Filtration segment sales of $27.1 million increased $1.4 million, or 5.5
percent in the second quarter of 2008, primarily driven by the continued
strength in the commercial aerospace market. Year-to-date, Filtration sales
increased $2.7 million, or 5.6 percent.
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 second quarter of fiscal 2008 included the
following:
In the Utility Solutions Group, EBIT for the 2008 second quarter was $10.5
million (14.0 percent of sales), compared to $6.1 million (12.4 percent of
sales) in the 2007 second quarter. The $4.4 million increase in EBIT dollars in
the 2008 second quarter was the result of the sales increases within the segment
as noted above. The 2008 second quarter also included higher TWACS NG software
amortization compared to the 2007 second quarter ($2.9 million compared to $1.8
million). Year-to-date, 2008 EBIT was $23.9 million (15.5 percent of sales)
compared to $3.3 million (4.2 percent of sales) with the significant increase
driven by the 94 percent increase in year-to-date sales within this segment.
In the Test segment, EBIT was $2.7 million (8.2 percent of sales) and $4.7
million (7.2 percent of sales) for the 2008 second quarter and six months,
respectively, compared to the 2007 second quarter and year-to-date EBIT of $4.1
million (12.0 percent of sales) and $6.2 million (10.0 percent of sales),
respectively. The 2008 EBIT included approximately $0.7 million of non-recurring
costs associated with the facility consolidation in Austin, Texas that was
completed in January 2008. Absent these charges, the Test segment margin for the
second quarter of 2008 would have been approximately 2.2 percent higher.
Additionally, EBIT margins were lower due to changes in sales mix involving
additional large chambers and fewer high-margin components sold in the
comparable periods.
In the Filtration segment, 2008 second quarter EBIT was $4.9 million (18.1
percent of sales) compared to $5.2 million (20.3 percent of sales) in the prior
year second 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
second quarter. Year-to-date, 2008 EBIT was $8.6 million (16.9 percent of sales)
compared to 2007 EBIT of $6.9 million (14.4 percent of sales) with the increases
being driven by the strength of the commercial aerospace market.
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Add Four
Corporate operating costs included in EBIT were $5.2 million and $10.2
million in the second quarter and six months of 2008, respectively, compared to
$4.6 million and $9.1 million in the 2007 second quarter and six 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 second quarter of
2008 was 37.3 percent compared to 18.5 percent in the second quarter of 2007,
and 37.5 percent compared to 2.4 percent for the six month periods of 2008 and
2007, respectively. The 2007 tax rates were favorably benefited by research tax
credits realized throughout 2007.
New Orders
New orders received in 2008 were $164.1 million for the second quarter, and
$294.4 million year-to-date resulting in a backlog at March 31, 2008 of $281.9
million.
New orders received were $99.6 million in the Utility Solutions Group,
$32.5 million in Test, and $31.9 million in Filtration during the second quarter
of 2008.
During the 2008 second quarter, Aclara Power-Line Systems received $25.1
million in orders from COOP and Municipal customers, and $8.9 million in orders
from PREPA.
Orders from PG&E during the 2008 second quarter were $32.3 million,
including $4.1 million related to the RF electric AMI order announced in March
2008. Subsequent to the second quarter end, the Company recorded an additional
$11.1 million of PG&E orders ($6.1 million RF gas and $4.7 million RF electric)
related to its AMI deployment, resulting in year-to-date PG&E orders of $57.6
million. Total PG&E order quantities since inception (1.7 million units, or
$112.4 million) are detailed in a separate press release also dated May 6, 2008.
Cash
Net cash provided by operating activities from Continuing Operations was
$37.7 million for the six months ended March 31, 2008. At March 31, 2008, the
Company had $31 million in cash and $250.5 million of total debt outstanding for
a net debt position of $219.5 million.
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Add Five
Doble Purchase Accounting
Management has finalized its purchase accounting valuation related to the
identifiable intangible assets for Doble and has reflected these changes in the
Balance Sheet at March 31, 2008. Identifiable intangible assets generally
include: trade names; customer relationships; patents and proprietary know-how;
firm order backlog; non-compete and employment agreements for key managers, and
specific software and database applications. These identifiable intangible
assets are required to be recorded on the opening balance sheet and amortized
over their useful lives.
The total amount of Doble's identifiable intangible assets subject to
amortization was $56.3 million and the estimated lives for these assets ranged
from five years for certain software and database applications to 20 years for
certain long-term customer relationships. Other intangible assets identified in
the purchase accounting valuation were $192.6 million of non-amortizable
goodwill and $112.3 million of indefinite life trade names.
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" during 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 second quarter results as we exceeded our internal targets on
nearly every operating metric. We came in well above plan on EBIT, cash flow,
working capital and entered orders. Our Utility Solutions Group orders were well
ahead of plan this quarter, with the bulk of the upside attributable to
additional orders received from PG&E for the gas portion of its AMI deployment
along with the initial RF electric order announced in March.
"On the AMR / AMI front, I remain very excited about the opportunities that
we are addressing in the international marketplace as well as the momentum we
are seeing frompotential domestic customers as well. The amount of international
pilot activity continues to expand, and we are confident that a few of these
trials will ultimately lead to initial deployments over the next 12 months.
"Regarding Doble, the early results have been excellent, and after spending
more time with the management team in Boston, I am more confident than ever that
this acquisition will continue to exceed our original expectations and will be a
significant contributor to our stated goal of increasing long-term shareholder
value."
Mr. Richey concluded, "The continued market leadership position that our
businesses demonstrate with innovative products and reliable services continues
to provide us with growth opportunities across all business segments. Based on
our current outlook described below, 2008 should be an exciting time for ESCO,
both from a customer and shareholder perspective."
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 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 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, EBIT margins and
EPS to be consistent with the ranges described in detail in the Company's
February 7, 2008 release.
Fiscal 2008 EPS is expected to be within the following ranges:
EPS - GAAP Continuing Operations $ 1.80 to 1.90
Add: Intangible Asset Amortization and
Inventory Step-Up $ 0.42 0.42
------- ----
EPS - Adjusted Basis $ 2.22 to 2.32
====== ====
As explained in the February 7, 2008release, 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 37.5 percent.
Conference Call
The Company will host a conference call today, May 6, at 4:00 p.m., Central
Time, to discuss the Company's second 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 1394569).
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 timing and amounts of amortization charges related to Doble's identified
intangible assets, potential 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 otherwritten 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 December 31, 2007; 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
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 PG&E
contracts; the Company's successful performance of the PG&E 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
------------------ ------------------
March 31, 2008 March 31, 2007
-------------- --------------
Net Sales $ 135,159 108,860
Cost and Expenses:
Cost of sales 78,263 66,698
SG&A 39,546 28,568
Amortization of intangible assets 4,598 2,792
Interest expense (income), net 3,187 (176)
Other (income) expenses, net (137) (10)
---- ---
Total costs and expenses 125,457 97,872
------- ------
Earnings before income taxes 9,702 10,988
Income taxes 3,620 2,035
----- -----
Net earnings from continuing
operations 6,082 8,953
Earnings from discontinued operations,
net of tax expense of $363 - 665
---- ---
Net earnings $ 6,082 9,618
========= =====
Earnings per share:
Basic
Continuing operations 0.24 0.35
Discontinued operations 0.00 0.02
---- ----
Net earnings $ 0.24 0.37
========= ====
Diluted
Continuing operations 0.23 0.34
Discontinued operations 0.00 0.02
---- ----
Net earnings $ 0.23 0.36
========= ====
Average common shares O/S:
Basic 25,847 25,895
====== ======
Diluted 26,250 26,491
====== ======
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Six Months Ended Six Months Ended
---------------- ----------------
March 31, 2008 March 31, 2007
-------------- --------------
Net Sales $ 270,116 189,447
Cost and Expenses:
Cost of sales 162,275 122,712
SG&A 73,056 55,191
Amortization of intangible assets 8,195 4,818
Interest expense (income), net 4,546 (497)
Other (income) expenses, net (351) (564)
---- ----
Total costs and expenses 247,721 181,660
------- -------
Earnings before income taxes 22,395 7,787
Income taxes 8,408 185
----- ---
Net earnings from continuing
operations 13,987 7,602
(Loss) earnings from discontinued
operations, net of tax expense of
$325 and $393, respectively (115) 635
Loss on sale of discontinued
operations, net of tax of $4,809 (4,974) -
------ ----
Net (loss) earnings from
discontinued operations (5,089) 635
Net earnings $ 8,898 8,237
========= =====
Earnings per share:
Basic
Continuing operations 0.54 0.29
Discontinued operations (0.20) 0.03
----- ----
Net earnings $ 0.34 0.32
========= ====
Diluted
Continuing operations 0.53 0.29
Discontinued operations (0.19) 0.02
----- ----
Net earnings $ 0.34 0.31
========= ====
Average common shares O/S:
Basic 25,803 25,885
====== ======
Diluted 26,227 26,477
====== ======
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
------------------ ----------------
March 31, March 31,
--------- ---------
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
- ---------
Utility Solutions
Group $ 74,571 49,226 153,880 79,260
Test 33,496 33,959 65,561 62,212
Filtration 27,092 25,675 50,675 47,975
------ ------ ------ ------
Totals $135,159 108,860 270,116 189,447
======== ======= ======= =======
EBIT
Utility Solutions
Group $ 10,466 6,109 23,874 3,327
Test 2,742 4,061 4,732 6,204
Filtration 4,913 5,226 8,562 6,908
Corporate (5,232) (1) (4,584) (2) (10,227) (3) (9,149) (4)
------ -- ------ -- ------- -- ------ --
Consolidated EBIT 12,889 10,812 26,941 7,290
Interest (expense)/
income (3,187) 176 (4,546) 497
------ --- ------ ---
Earnings before
income taxes $ 9,702 10,988 22,395 7,787
======== ====== ====== =====
Note: Depreciation and amortization expense was $7.0 million and
$4.3 million for the quarters ended March 31, 2008 and 2007,
respectively, and $12.7 million and $7.8 million for the
six-month periods ended March 31, 2008 and 2007, respectively.
(1) Includes $1.1 million of amortization of acquired intangible assets.
(2) Includes $0.6 million of amortization of acquired intangible assets.
(3) Includes $1.9 million of amortization of acquired intangible assets.
(4) Includes $1.2 million of amortization of acquired intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, September 30,
2008 2007
---- ----
Assets
Cash and cash equivalents $ 30,973 18,638
Accounts receivable, net 100,575 85,319
Costs and estimated earnings
on long-term contracts 9,001 11,520
Inventories 71,670 55,885
Current portion of deferred
tax assets 15,934 25,264
Other current assets 15,985 28,054
Current assets from discontinued
operations - 35,670
------- ------
Total current assets 244,138 260,350
Property, plant and equipment, net 72,903 50,193
Goodwill 318,365 124,757
Intangible assets, net 240,540 74,624
Other assets 14,193 10,338
Other assets from discontinued
operations - 55,845
-------- ------
$890,139 576,107
======== =======
Liabilities and Shareholders' Equity
- ------------------------------------
Short-term borrowings and current
portion of long-term debt $ 15,474 -
Accounts payable 36,814 45,726
Current portion of deferred revenue 17,665 24,621
Other current liabilities 46,328 31,859
Current liabilities from discontinued
operations - 16,994
------- ------
Total current liabilities 116,281 119,200
Long-term portion of deferred revenue 9,240 4,514
Deferred tax liabilities 82,208 18,522
Other liabilities 18,261 15,854
Long-term debt 235,000 -
Other liabilities from discontinued
operations - 2,534
Shareholders' equity 429,149 415,483
------- -------
$890,139 576,107
======== =======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
March 31, 2008
--------------
Cash flows from operating activities:
Net earnings $ 8,898
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Net loss from discontinued operations 5,089
Depreciation and amortization 12,745
Stock compensation expense 2,326
Changes in operating working capital 1,451
Effect of deferred taxes 7,602
Change in deferred revenues and costs, net (859)
Other 408
---
Net cash provided by operating activities -
continuing operations 37,660
Net loss from discontinued operations,
net of tax (5,089)
Net cash provided by discontinued operations 125
---
Net cash used by operating activities -
discontinued operations (4,964)
------
Net cash provided by operating activities 32,696
------
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (328,829)
Proceeds from sale of marketable securities 4,966
Additions to capitalized software (8,004)
Capital expenditures - continuing operations (8,673)
------
Net cash used by investing activities -
continuing operations (340,540)
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 (267,296)
--------
Cash flows from financing activities:
Proceeds from long-term debt 275,197
Principal payments on long-term debt (24,723)
Debt issuance costs (2,965)
Net decrease in short-term borrowings -
discontinued operations (2,844)
Excess tax benefit from stock options exercised 737
Other 1,533
-----
Net cash provided by financing activities 246,935
-------
Net increase in cash and cash equivalents 12,335
Cash and cash equivalents, beginning of period 18,638
------
Cash and cash equivalents, end of period $ 30,973
=========
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered Utility
- -------------------
Orders-Q2 FY 2008 Solutions Test Filtration Total
- ----------------- --------- ---- ---------- -----
Beginning Backlog-
12/31/07 continuing
operations $ 111,128 61,280 80,615 253,023
Entered Orders 99,623 32,514 31,935 164,072
Sales (74,571) (33,496) (27,092) (135,159)
------- ------- ------- --------
Ending Backlog-3/31/08 $ 136,180 60,298 85,458 281,936
========= ====== ====== =======
Backlog And Entered Utility
- -------------------
Orders-Q2 YTD 2008 Solutions Test Filtration Total
- ------------------ --------- ---- ---------- -----
Beginning Backlog-
9/30/07 continuing
operations $ 123,176 60,038 74,394 257,608
Entered Orders 166,884 65,821 61,739 294,444
Sales (153,880) (65,561) (50,675) (270,116)
-------- ------- ------- --------
Ending Backlog-3/31/08 $ 136,180 60,298 85,458 281,936
========= ====== ====== =======
# # #
Exhibit 99.2
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 ADDITIONAL AMI ORDERS AT PG&E
ST. LOUIS, May 6, 2008 - ESCO Technologies Inc. (NYSE: ESE) today announced
that subsequent to the quarter ended March 31, 2008, Pacific Gas and Electric
Company (PG&E) has placed follow-on orders for an additional 100,000 Aclara RF
electric and an additional 119,000 Aclara RF gas advanced metering
infrastructure (AMI) products for PG&E's SmartMeter Program. The total value of
these April 2008 orders was $11.1 million.
Earlier in the year, PG&E indicated its intent to order additional
quantities of Aclara RF electric AMI devices throughout 2008, and these
additional 100,000 RF electric units are a step toward this intended goal.
The $11.1 million of new orders are in addition to the $32.3 million of
orders received during the 2008 second quarter as disclosed in the Company's
earnings release dated May 6, 2008, which brings the fiscal 2008 year-to-date
total PG&E orders to $57.6 million.
Since the inception of its SmartMeter Program, PG&E has placed firm orders
with Aclara for 1.7 million total AMI units with a total contract value of
$112.4 million through today, with the expectation of additional orders over the
remainder of fiscal 2008.
The 1.7 million Aclara units ordered to date include approximately 390,000
TWACS power-line system units; approximately 190,000 STAR RF electric units;
and approximately 1.1 million STAR RF gas units, along with related network
infrastructure and software.
The RF electric units will operate under PG&E's installed STAR Network AMI
system which currently manages data from nearly 300,000 gas meters already
installed in the region.
Gary Moore, President of Aclara RF Systems, commented, "We are enthusiastic
about the performance of our suite of new product offerings, and excited that
PG&E will expand its deployment of Aclara's AMI technology for its electric as
well as gas requirements in theCentral Valley. We believe that this decision
will allow PG&E to cost-effectively expand its industry leading AMI system and
leverage its present fixed-network infrastructure while meeting the requirements
of its customers for energy-efficient utility solutions today, and well into the
future."
Vic Richey, ESCO's Chairman and Chief Executive Officer, commented, "I am
very pleased to be partnered with PG&E on this AMI deployment and I'm proud to
announce that we have nearly 1.7 million AMI units under contract with this
valued customer. We remain committed to supporting PG&E in their SmartMeter
program, and we will not waver in our support of helping PG&E achieve its stated
AMI goals. We will continue to invest time and resources in new products and
innovative ideas which continue to show results that allow PG&E to expand its
Aclara product deployment. Although PG&E has not concluded its evaluation of
competing electric AMI technologies, we believe this decision to deploy
additional Aclara products during 2008 is a promising development and will allow
us to demonstrate on a large scale the features and benefits that our hybrid
electric solution offers."
Forward-Looking Statements
Statements in this press release regarding the amounts and timing of fiscal
2008 and beyond electric or gas product deliveries to PG&E, the ultimate outcome
of PG&E's ongoing assessment of electric AMI technologies, benefits derived by
PG&E, future investments, 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 December 31,
2007; actions by the California Public Utility Commission; PG&E's Board of
Directors or PG&E's Management impacting PG&E's AMI projects; PG&E's evaluation
of other technologies to meet their requirements for the electric portion of its
service territory; 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 underthe PG&E contracts; the Company's successful performance of the
PG&E contracts; 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;
termination for convenience of customer contracts; timing and magnitude of
future contract awards; performance issues with key customers, suppliers and
subcontractors; labor disputes; and changes in laws and regulations.
About Aclara
The Aclara brand represents the industry's leading fixed-network AMI/AMR
technologies and MDM software serving water, gas, and electric utilities
worldwide. While Aclara is the singular brand and identity, the Company retains
the known technology brands of DCSI (TWACS), Hexagram, Inc. (STAR Network),
and Nexus Energy Software (Energy Vision and ENERGYprism). These three companies
operate as Aclara Power-Line Systems Inc., Aclara RF Systems Inc., and Aclara
Software Inc., respectively. Further information regarding Aclara is available
on the Company's web site at www.AclaraTech.com.
About ESCO
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.
# # #