SALES UP 15 PERCENT / EPS UP 60 PERCENT ST. LOUIS, May 5
/PRNewswire-FirstCall/ -- ESCO Technologies Inc. (NYSE: ESE) today
announced its results for the second quarter ended March 31, 2009.
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. Discontinued Operations
represent the results of Comtrak Technologies LLC which was sold in
March 2009 and the filtration business of Filtertek which was sold
in November 2007 (first quarter fiscal 2008). Second Quarter 2009
vs. 2008 Highlights - Continuing Operations -- Net sales increased
14.7 percent to $154.2 million. -- EBIT dollars increased 34.5
percent to $18.4 million. -- EBIT as a percentage of sales
increased to 11.9 percent from 10.2 percent. -- EPS increased 60
percent to $0.40 per share from $0.25 per share. -- Net debt
outstanding was $181.7 million at March 31, 2009 reflecting a
leverage ratio of 1.99x, well below the credit facility covenant of
3.5x. -- Entered orders were $156.7 million with a book-to-bill
ratio of 102 percent. -- Firm orders of Aclara RF AMI products with
PG&E gas were approximately $25 million (bringing total gas
product orders to over 3 million units to date) and with New York
City Water were approximately $16 million. Chairman's Commentary
Vic Richey, Chairman and Chief Executive Officer, commented, "I am
very pleased with the significant growth reflected in our second
quarter operating results, especially in this challenging global
economy. Additionally, I remain cautiously optimistic about the
balance of the year based on our growth in sales and earnings
year-to-date, our strong backlog in place today, and our expected
orders for the balance of the year. "Through regular and detailed
planning meetings with our Management teams, we continue to
maintain a high degree of visibility and confidence surrounding the
balance of the fiscal year. But given the uncertainties of today's
macro environment, we are taking a more conservative posture as we
address our expected outlook for 2009. As a result of the current
cycle, we are adjusting our total year expectations to reflect a
modest level of uncertainty, which I would characterize as a
reflection of our conservative planning approach. "In spite of
today's economy, we continue to see meaningful opportunities
developing across the businesses which we believe can help shield
our downside risks. To help weather this storm, we will adhere to
our strict cost management disciplines as we work our way through
this cycle and demonstrate our resiliency. "While aggressively
managing our operating costs, we will maintain our focus on
creating significant growth opportunities. To ensure future growth,
we have maintained our R&D and engineering expenditures,
primarily directed toward new product development initiatives in
the AMI and Smart Grid area, along with a significant amount of new
Space program opportunities. I am confident that our new products
currently being introduced will position us well for the future.
"In closing, we are making meaningful progress at PG&E on the
gas AMI project, along with the New York City Water and Idaho Power
AMI contracts." Sales For 2009, sales increased 14.7 percent during
the second quarter and 11.8 percent for the first six months
compared to the same periods of 2008. As noted in earlier releases,
the prior year sales amount included $20.5 million of revenues
recognized that had previously been deferred from prior periods
related to PG&E / TNG revenue recognition. YTD sales increased
21 percent excluding the 2008 TNG revenue recognized. Utility
Solutions Group (USG) sales in 2009 increased 27.4 percent for the
second quarter and 18.8 percent for the first six months compared
to the second quarter and first six months of 2008, respectively.
Absent the TNG sales deferral in 2008, YTD sales increased 37.1
percent from the prior year. USG sales increases in 2009 were
primarily driven by significantly higher deliveries of fixed
network RF AMI products to PG&E (gas) and continued increases
in water AMI product deliveries. Additionally, having Doble for six
months of 2009 versus four months in 2008 contributed an additional
$13 million of YTD sales. Test sales in 2009 increased slightly in
the second quarter and are up 5.6 percent YTD, primarily due to an
increase in large chamber deliveries to the international wireless
and electronics end-markets. Filtration sales in 2009 decreased
slightly in the second quarter and YTD as sales increases in the
defense aerospace and space product lines were offset by lower
commercial aerospace product deliveries. 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 and YTD periods of fiscal 2009 included the
following: In the USG segment, EBIT for the 2009 second quarter was
$16.1 million (17.2 percent of sales) compared to $11.2 million
(15.2 percent of sales) in the 2008 second quarter. The $4.9
million increase in EBIT dollars was driven by the significant
sales increase of RF AMI products noted above. The increase in
USG's 2009 YTD EBIT was mitigated by the $8.5 million of EBIT
associated with the TNG revenue recognized in 2008. The RF AMI
business contributed the largest increase to EBIT during the first
six months of 2009. In the Test segment, EBIT dollars and EBIT
margins were significantly higher in 2009 due to the sales
increases in 2009, favorable changes in sales mix, and rigorous
cost controls. In the Filtration segment, EBIT dollars and EBIT
margins decreased in 2009 due to lower sales of high margin
commercial aerospace products, an increase in research and
development costs, and higher bid and proposal costs incurred
related to the pursuit of a significant number of Space related
projects. Corporate operating costs were higher in 2009 due to
higher amortization expenses related to recent acquisitions that
included identifiable intangible assets. Effective Tax Rate The
effective tax rate from Continuing Operations in the second quarter
of 2009 was 36.1 percent compared to 37.4 percent in the second
quarter of 2008. The 2009 second quarter tax rate was consistent
with the Company's guidance provided in February 2009. The 2009 YTD
rate was 34.1 percent compared to 37.6 percent and was favorably
impacted by Congress' extension of the research tax credit during
the 2009 first quarter. New Orders New orders received were $156.7
million and $296.2 million in the 2009 second quarter and YTD
periods, respectively, compared to $162.5 million and $293.2
million in the comparable periods of 2008. Backlog at March 31,
2009 was $260.8 million. Orders from PG&E for AMI gas products
in the 2009 second quarter were $24.3 million, bringing the total
gas project-to-date to over 3 million units, or $175 million. The
entire PG&E project-to-date (gas and electric) represents 3.7
million units, worth approximately $225 million. Cumulative
orders-to-date for the $68.3 million New York City Water AMI
project were $20.9 million, and orders-to-date for the $25 million
Idaho Power AMI project were $6.2 million. Business Outlook - 2009
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 impact of any future acquisitions or divestitures, and reflects
the impact of the amortization of identifiable intangible purchase
accounting assets related to Aclara Software, Aclara RF, Doble and
LDIC; the impact of the Doble inventory step-up resulting in "lost"
profit; and the amortization of TWACS NG(TM) software. Aclara RF
Facility Relocation Due to its significant sales growth, Aclara RF
Systems Inc. (formerly Hexagram, Inc.) is in the process of
relocating its operations from three existing leased facilities, to
a single, newer, more efficient leased facility in the greater
Cleveland area. As a result, approximately $2.0 million in pretax
nonrecurring exit and relocation costs are expected to be incurred
during the second half of fiscal 2009 in the Utility Solutions
Group, primarily related to the noncash write-off of leasehold
improvements, vacant facility charges, and moving costs. Comtrak
Technologies LLC As previously disclosed, Management had planned to
exit this business, and during March 2009, the assets of Comtrak
were sold for $3.4 million and its results of operations are
included in Discontinued Operations. Revenues and Earnings Per
Share - 2009 Based on Management's current expectations along with
the sale of Comtrak, the Company is revising its outlook for fiscal
2009 as follows: -- Revenues of approximately $650 million; -- EPS
- GAAP Basis of between $1.90 and $2.00 (including $0.05 per share
of expenses related to the Aclara RF facility relocation charge
noted above); and, -- EPS - Adjusted Basis of between $2.32 and
$2.42 per share. EPS - Adjusted Basis excludes approximately $0.42
per share of costs related to TWACS NG software amortization,
purchase accounting intangible asset amortization related to the
Company's recent acquisitions, and Doble's purchase accounting
inventory step-up. Management believes using "EPS - Adjusted Basis"
as a financial measure is important for investors to understand the
Company's operations and its ability to service its debt. The
full-year 2009 tax rate is expected to be approximately 35 percent,
with quarterly variations depending on the timing and amount of
discrete tax benefits and charges. Chairman's Commentary - Wrap-Up
Mr. Richey further commented, "As noted above, I remain cautiously
optimistic about the balance of fiscal 2009. Through rigorous
management oversight and a disciplined planning process, I am
confident that we have sufficient opportunities and the appropriate
contingencies in place to allow us to execute our current plan and
achieve the operating results within our range of expectations.
Having Doble for the full year and beginning our AMI deployments
with Idaho Power and New York City Water should continue to provide
us with positive momentum throughout 2009." Conference Call The
Company will host a conference call today, May 5, at 4 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 http://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 4500221). Forward-Looking Statements Statements in this
press release regarding the amounts and timing of fiscal 2009
future revenues, results, earnings, EBIT, EPS - Adjusted Basis, EPS
- GAAP Basis, sales growth, orders, growth opportunities, success
of new products and technologies, costs incurred with the Aclara RF
relocation and new building, the fiscal 2009 effective annual tax
rate, the timing and certainty of utility customer spending, 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, 2008; the effect of the
American Recovery and Reinvestment Act of 2009; the success of the
Company's competitors; changes in Federal or State energy laws; 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; and the Company's successful execution
of internal operating plans. 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
http://www.escotechnologies.com/. ESCO TECHNOLOGIES INC. AND
SUBSIDIARIES Condensed Consolidated Statements of Operations
(Unaudited) (Dollars in thousands, except per share amounts) Three
Months Three Months Ended Ended March 31, 2009 March 31, 2008
-------------- -------------- Net Sales $154,156 134,400 Cost and
Expenses: Cost of sales 92,226 77,889 SG&A 38,237 38,535
Amortization of intangible assets 4,985 4,467 Interest expense
1,756 3,172 Other expenses (income), net 357 (136) --- ---- Total
costs and expenses 137,561 123,927 ------- ------- Earnings before
income taxes 16,595 10,473 Income taxes 5,990 3,912 ----- ----- Net
earnings from continuing operations 10,605 6,561 Loss from
discontinued operations, net of tax benefit of $101 and $292,
respectively (177) (479) Loss on sale from discontinued operations,
net of tax benefit of $905 (32) - --- --- Net earnings from
discontinued operations (209) (479) Net earnings $10,396 6,082
======= ===== Earnings per share: Basic Continuing operations 0.41
0.25 Discontinued operations (0.01) (0.01) ----- ----- Net earnings
$0.40 0.24 ===== ==== Diluted Continuing operations 0.40 0.25
Discontinued operations (0.01) (0.02) ----- ----- Net earnings
$0.39 0.23 ===== ==== Average common shares O/S: Basic 26,177
25,847 ====== ====== Diluted 26,470 26,250 ====== ====== ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES Condensed Consolidated
Statements of Operations (Unaudited) (Dollars in thousands, except
per share amounts) Six Months Six Months Ended Ended March 31, 2009
March 31, 2008 -------------- -------------- Net Sales $301,513
269,672 Cost and Expenses: Cost of sales 184,842 162,071 SG&A
77,519 70,986 Amortization of intangible assets 9,587 7,933
Interest expense 4,374 4,529 Other expenses (income), net 244 (350)
--- ---- Total costs and expenses 276,566 245,169 ------- -------
Earnings before income taxes 24,947 24,503 Income taxes 8,502 9,208
----- ----- Net earnings from continuing operations 16,445 15,295
Loss from discontinued operations, net of tax of $112 and $1,125,
respectively (197) (1,423) Loss on sale from discontinued
operations, net of tax of $905 and $4,809, respectively (32)
(4,974) --- ------ Net earnings from discontinued operations (229)
(6,397) Net earnings $16,216 8,898 ======= ===== Earnings per
share: Basic Continuing operations 0.63 0.59 Discontinued
operations (0.01) (0.25) ----- ----- Net earnings $0.62 0.34 =====
==== Diluted Continuing operations 0.62 0.58 Discontinued
operations (0.01) (0.24) ----- ----- Net earnings $0.61 0.34 =====
==== Average common shares O/S: Basic 26,143 25,803 ====== ======
Diluted 26,444 26,227 ====== ====== ESCO TECHNOLOGIES INC. AND
SUBSIDIARIES Condensed Business Segment Information (Unaudited)
(Dollars in thousands) Three Months Ended Six Months Ended March
31, March 31, 2009 2008 2009 2008 ---- ---- ---- ---- Net Sales
----------- Utility Solutions Group $94,065 73,812 182,266 153,436
Test 33,713 33,496 69,202 65,561 Filtration 26,378 27,092 50,045
50,675 ------ ------ ------ ------ Totals $154,156 134,400 301,513
269,672 ======== ======= ======= ======= EBIT ----- Utility
Solutions Group $16,138 11,222 26,693 25,965 Test 3,748 2,742 6,982
4,732 Filtration 4,227 4,913 7,090 8,562 Corporate (5,762) (1)
(5,232) (2) (11,444) (3) (10,227) (4) ------ ------ ------- -------
Consolidated EBIT 18,351 13,645 29,321 29,032 Less: Interest
expense (1,756) (3,172) (4,374) (4,529) ------ ------ ------ ------
Earnings before income taxes $16,595 10,473 24,947 24,503 =======
====== ====== ====== Note: Depreciation and amortization expense
was $7.2 million and $6.9 million for the quarters ended March 31,
2009 and 2008, respectively, and $15.1 million and $12.4 million
for the six-month periods ended March 31, 2009 and 2008,
respectively. (1) Includes $1.2 million of amortization of acquired
intangible assets. (2) Includes $1.1 million of amortization of
acquired intangible assets. (3) Includes $2.4 million of
amortization of acquired intangible assets. (4) Includes $1.9
million of amortization of acquired intangible assets. ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES Reconciliation of Non-GAAP
Financial Measures (unaudited) EPS - Adjusted Basis Reconciliation
- FY 2009 --------------------------------------------- EPS - GAAP
Basis - FY 2009 Range $1.90 2.00 Adjustments (defined below) 0.42
0.42 ---- ---- EPS - Adjusted Basis - FY 2009 Range $2.32 2.42
===== ==== Adjustments exclude pre-tax intangible asset
amortization expense related to TWACS NG software, purchase
accounting intangible amortization related to the Company's
acquisitions within the last three years and, the expense related
to the purchase accounting step-up of Doble Engineering Company
inventory. ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Condensed
Consolidated Balance Sheets (Unaudited) (Dollars in thousands)
March 31, September 30, 2009 2008 ---- ---- Assets ------ Cash and
cash equivalents $26,600 28,667 Accounts receivable, net 121,156
134,710 Costs and estimated earnings on long-term contracts 4,239
9,095 Inventories 81,868 65,019 Current portion of deferred tax
assets 14,540 15,368 Other current assets 17,215 14,888 Current
assets from discontinued operations - 2,889 --- ----- Total current
assets 265,618 270,636 Property, plant and equipment, net 69,774
72,353 Goodwill 329,659 328,878 Intangible assets, net 227,690
236,192 Other assets 17,565 17,665 Other assets from discontinued
operations - 2,349 --- ----- $910,306 928,073 ======== =======
Liabilities and Shareholders' Equity
------------------------------------ Short-term borrowings and
current maturities of long-term debt $50,000 50,000 Accounts
payable 43,768 48,982 Current portion of deferred revenue 18,386
18,226 Other current liabilities 44,531 49,934 Current liabilities
from discontinued operations - 1,541 --- ----- Total current
liabilities 156,685 168,683 Long-term portion of deferred revenue
2,087 2,228 Deferred tax liabilities 83,167 83,515 Other
liabilities 20,242 21,760 Long-term debt 165,504 183,650
Shareholders' equity 482,621 468,237 ------- ------- $910,306
928,073 ======== ======= ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in
thousands) Six Months Ended March 31, 2009 -------------- Cash
flows from operating activities: Net earnings $16,216 Adjustments
to reconcile net earnings to net cash provided by operating
activities: Net loss from discontinued operations 229 Depreciation
and amortization 15,108 Stock compensation expense 2,097 Changes in
operating working capital (11,413) Effect of deferred taxes (1,074)
Other (1,242) ------ Net cash provided by operating activities -
continuing operations 19,921 Net loss from discontinued operations,
net of tax (229) Net cash provided by discontinued operations 39
--- Net cash used by operating activities - discontinued operations
(190) ---- Net cash provided by operating activities 19,731 ------
Cash flows from investing activities: Additions to capitalized
software (2,487) Capital expenditures - continuing operations
(3,116) ------ Net cash used by investing activities - continuing
operations (5,603) Proceeds from divestiture of business, net -
discontinued operations 3,100 ----- Net cash used by investing
activities (2,503) ------ Cash flows from financing activities:
Proceeds from long-term debt 27,000 Principal payments on long-term
debt (45,146) Excess tax benefit from stock options exercised 782
Proceeds from exercise of stock options 1,164 Other (190) ---- Net
cash used by financing activities (16,390) ------- Effect of
exchange rate changes on cash and cash equivalents (2,905) ------
Net decrease in cash and cash equivalents (2,067) Cash and cash
equivalents, beginning of period 28,667 ------ Cash and cash
equivalents, end of period $26,600 ======= ESCO TECHNOLOGIES INC.
AND SUBSIDIARIES Other Selected Financial Data (Unaudited) (Dollars
in thousands) Backlog And Entered Orders - Q2 FY 2009 Utility
Solutions Test Filtration Total --------------------
----------------- ---- ---------- ----- Beginning Backlog -
12/31/08 continuing opers $121,554 64,236 72,506 258,296 Entered
Orders 97,247 26,024 33,413 156,684 Sales (94,065) (33,713)
(26,378) (154,156) ------- ------- ------- -------- Ending Backlog
- 3/31/09 $124,736 56,547 79,541 260,824 ======== ====== ======
======= Backlog And Entered Orders - YTD Q2 FY 2009 Utility
Solutions Test Filtration Total -------- ----------------- ----
---------- ----- Beginning Backlog - 9/30/08 continuing opers
$124,847 69,823 71,463 266,133 Entered Orders 182,155 55,926 58,123
296,204 Sales (182,266) (69,202) (50,045) (301,513) --------
------- ------- -------- Ending Backlog - 3/31/09 $124,736 56,547
79,541 260,824 ======== ====== ====== ======= DATASOURCE: ESCO
Technologies Inc. CONTACT: Patricia K. Moore, Director, Investor
Relations of ESCO Technologies Inc., +1-314-213-7277; or media
inquiries, David P. Garino, +1-314-982-0551, for ESCO Technologies
Inc. Web Site: http://www.escotechnologies.com/
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