ST. LOUIS, Aug. 4 /PRNewswire-FirstCall/ -- ESCO Technologies Inc.
(NYSE: ESE) today announced its results for the third quarter ended
June 30, 2009. Within this release, references to "quarters" and
"year-to-date" (YTD) 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. Discontinued
Operations represent the results of Comtrak which was sold in March
2009 and the filtration business of Filtertek which was sold in
November 2007 (first quarter fiscal 2008). The results for the
third quarter ended June 30, 2009 include a pretax charge of $2.3
million, or $0.07 per share after tax, related to the Aclara RF
facility relocation which was completed in June. Management
believes adding back this cost to the quarterly earnings results
("operational" basis) is a more relevant measure for investors to
understand the Company's ongoing operating results for the current
period. The third quarter effective tax rate contributed positively
to both the 2009 and 2008 results of operations, and was 23.1
percent and 23.2 percent in third quarters of 2009 and 2008,
respectively. The favorable rates were the result of approximately
$2 million in income tax benefits realized in each of the noted
periods. The following discussion of the 2009 results compared to
2008 is based on the "operational" amounts for 2009. 2009 vs. 2008
Highlights - Continuing Operations -- Third quarter 2009
"operational" EPS was $0.49 per share compared to $0.47 per share
in 2008, reflecting a 4.3 percent increase in the current period.
GAAP EPS was $0.42 per share for the 2009 third quarter reflecting
the RF facility relocation charges. -- YTD "operational" EPS was
$1.11 per share in 2009 compared to $1.05 per share in 2008. The
2008 YTD EPS amount includes a $0.20 per share contribution from
the recognition of the PG&E / TWACS NG(TM) software deferred
revenue described below. -- The effective tax rates in the third
quarters of 2009 and 2008 were both favorably impacted by
approximately $2 million in income tax benefits, resulting in
comparable tax rates of 23.1 percent and 23.2 percent. -- Sales
decreased 2.1 percent in the third quarter, but increased 6.8
percent YTD. -- Cash flow from operating activities generated $17.1
million during the third quarter, and $37 million YTD. As a result,
net debt outstanding was reduced to $165.4 million at June 30, 2009
reflecting a leverage ratio of 1.92x. -- Entered orders were $157.6
million in the third quarter, reflecting a book-to-bill ratio of
106 percent, and YTD entered orders were $453.8 million, or 102
percent of YTD sales. -- Orders in the third quarter for Aclara RF
AMI gas products with PG&E were $18.1 million bringing total
gas product orders to approximately 3.4 million units and $193
million to date. -- Orders for RF AMI products with New York City
Water were $13.3 million in the quarter, bringing the total New
York City Water project to 427,000 units and $34.3 million to date.
-- Orders of Aclara PLS AMI products in the 2009 third quarter were
$46.9 million, reflecting the highest quarterly order amount at PLS
in two years. -- Aclara PLS orders from COOP's and Muni's were
$39.1 million in the quarter, and $69.3 million YTD, bringing total
YTD Aclara PLS orders to $88.6 million, including $5.4 million of
load control / demand response devices. Chairman's Commentary Vic
Richey, Chairman and Chief Executive Officer, commented, "I am
pleased with our operating results during the quarter and
year-to-date, especially given today's challenging global economy.
While several of our end markets continued to see a push-out of
product deliveries, mainly commercial aerospace and Doble hardware,
we were able to achieve the majority of our internal operating
goals. "Our Filtration and Test businesses continue to maintain
their focus on appropriate cost structures, and we are extremely
confident that we will come out the other side of this
unprecedented downturn stronger and more profitable than before.
"Our Aclara group continues to see solid order growth, evidenced by
the positive book-to-bill ratio for the quarter and the year. While
pleased with the strong order book, we, like others in the AMI
space, have experienced a push-out of some expected orders and
sales as a result of the Government's planned Stimulus spending.
Several of our customers have told us that they are waiting on
placing orders until they fully clarify their position with the DOE
on how and when to effectively proceed with their infrastructure
spending. The customers' goal is to maximize the impact of the
available grant money. "As a result, while the confidence in our
longer-term outlook remains bullish, we believe the overall impact
of the Stimulus funding is having a negative impact on the near
term. We are actively engaged in assisting several AMI customers in
navigating through the grant process, and we are expecting that
once the administrative process is completed, we will benefit from
this program. "While we continue to aggressively manage our
operational cost structure through regular and detailed planning
meetings with our Management teams, the uncertainties of today's
macro environment and the delays caused by the Stimulus program are
causing us to take a more conservative earnings posture as we
address the last two months of 2009. As a result, and as discussed
later in this release, we are adjusting our total year expectations
to reflect this modest level of uncertainty. "Despite today's
economic conditions, we are maintaining our focus on creating
significant growth opportunities so that once the economy rebounds,
we will be best-positioned to capitalize on these opportunities. To
ensure our future growth, we are maintaining our R&D and
engineering expenditures, which are 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 continue making
meaningful progress on all of our major AMI projects, including
PG&E gas, New York City Water, and Idaho Power." Sales For
2009, sales decreased 2.1 percent during the third quarter and
increased 6.8 percent for the first nine months compared to the
same periods of 2008. As noted in earlier releases, the prior
year's YTD sales amount included $20.5 million of revenues
recognized that had previously been deferred from prior periods
related to PG&E / TWACS NG software revenue recognition. YTD
sales increased 12.3 percent excluding the 2008 PG&E deferred
revenue recognized. Utility Solutions Group (USG) sales in 2009
increased 4.3 percent for the third quarter and 13.5 percent for
the first nine months compared to the third quarter and first nine
months of 2008, respectively. Absent the TNG sales deferral in
2008, YTD sales increased 24.1 percent from the prior year. The 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 nine months of 2009 versus seven
months in 2008 contributed an additional $11.6 million of YTD
sales. Test sales in 2009 decreased in the third quarter and YTD
periods, primarily due to the timing of large chamber deliveries to
the international wireless and electronics end-markets. Filtration
sales in 2009 decreased in the third 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 third quarter and YTD periods of fiscal 2009
included the following: In the USG segment, "operational" EBIT for
the 2009 third quarter was $15.5 million ($13.2 million on a GAAP
basis) compared to 2008's third quarter EBIT of $16.2 million.
USG's EBIT was impacted by a significant sales increase of RF AMI
products, offset by lower sales of PLS AMI products and lower Doble
hardware sales. The RF AMI business contributed the largest
increase to EBIT during the first nine months of 2009. The 2009 YTD
increase in USG's EBIT was partially mitigated by the 2008 YTD EBIT
contribution of $8.5 million associated with the PG&E deferred
revenue recognized in the prior year first quarter. In the Test
segment, EBIT dollars and EBIT margins were significantly higher in
2009 due to favorable changes in sales mix and rigorous cost
controls throughout the organization. In the Filtration segment,
EBIT dollars 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 in the
pursuit of a significant number of Space related projects. For the
third quarter of 2009, Filtration's EBIT margin increased due to
stringent cost management across the segment. Corporate operating
costs in the third quarter were lower in 2009 due to reduced
discretionary spending, partially offset by higher amortization
expenses related to recent acquisitions which included identifiable
intangible assets. Effective Tax Rate The effective tax rate from
Continuing Operations in the third quarter of 2009 was 23.1 percent
compared to 23.2 percent in the third quarter of 2008. The 2009 and
2008 third quarter tax rates were favorably impacted by
approximately $2 million of income tax benefits. The 2009 YTD rate
was 30.1 percent compared to 31.9 percent and was also favorably
impacted by income tax benefits recognized. New Orders New orders
received were $157.6 million and $453.8 million in the 2009 third
quarter and YTD periods, respectively, reflecting a positive
book-to-bill in both the quarter and nine month periods. Backlog at
June 30, 2009 grew to $270.3 million compared to $266.1 million at
the beginning of the fiscal year. Orders from PG&E for AMI gas
products and from New York City for AMI water products are noted on
page one of this release. Orders-to-date for the $25 million Idaho
Power AMI project were $8.2 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 the significant sales growth since its
acquisition, Aclara RF Systems Inc. (formerly Hexagram, Inc.)
relocated its operations from three leased facilities to a single,
newer, more efficient leased facility in the greater Cleveland
area. As a result, approximately $2.3 million, or $0.07 per share,
of exit and relocation costs were incurred during the fiscal 2009
third quarter in the Utility Solutions Group. These costs primarily
related to the noncash write-off of leasehold improvements, vacant
facility charges, and moving costs. Revenues and Earnings Per Share
- 2009 Based on Management's current expectations, the outlook for
fiscal 2009 is as follows: -- Revenues of approximately $625
million to $630 million; -- EPS is expected to be in the following
ranges: EPS - GAAP Continuing Operations $1.82 to 1.87 Add: Aclara
RF Facility Exit / Relocation $0.07 0.07 ----- ---- EPS -
"Operational" Basis $1.89 to 1.94 ===== ==== Add: Intangible Amort.
& Inventory Step-Up $0.42 0.42 ----- ---- EPS - "Adjusted"
Basis $2.31 to 2.36 ===== ==== EPS - Adjusted Basis excludes
approximately $0.42 per share of costs related to TWACS NG software
amortization, purchase accounting intangible asset amortization,
and Doble's purchase accounting inventory step-up, as well as the
$0.07 per share of Aclara RF facility exit and relocation costs.
The 2009 full-year tax rate is expected to be approximately 33
percent, consistent with the full year tax rate of 33.3 percent for
2008. The favorable rates are the result of approximately $2
million in income tax benefits realized in each of the years noted.
Management believes using EPS - "Operational" Basis and EPS -
"Adjusted" Basis as financial measures is an important metric for
investors to understand the Company's operations and its ability to
service its debt. Chairman's Commentary - Wrap-Up Mr. Richey
concluded, "As noted above, while 2009 has been a tough year as it
relates to today's global economic challenges, I remain optimistic
about our current business prospects both domestically and
internationally. 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 strategic plan and to achieve our
long-term goal of increasing shareholder value." Conference Call
The Company will host a conference call today, August 4, 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 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 8004952). Forward-Looking Statements Statements in this
press release regarding the amounts and timing of fiscal 2009
future revenues, results, earnings, EBIT, EBIT margins, EPS - GAAP
Continuing Operations, EPS - Operational Basis, EPS - Adjusted
Basis, EPS - GAAP Basis, sales growth, orders, growth
opportunities, success of new products and technologies, the fiscal
2009 effective annual tax rate, the timing and certainty of utility
customer spending, the impact of the Stimulus funding, 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
Three Months Months Ended Ended June 30, June 30, 2009 2008 -------
------- Net Sales $148,102 151,351 Cost and Expenses: Cost of sales
88,040 89,787 SG&A 36,636 37,896 Amortization of intangible
assets 4,792 4,444 Interest expense 1,587 2,572 Other expenses, net
2,617 514 ----- --- Total costs and expenses 133,672 135,213
------- ------- Earnings before income taxes 14,430 16,138 Income
taxes 3,337 3,737 ----- ----- Net earnings from continuing
operations 11,093 12,401 Earnings from discontinued operations, net
of tax benefit of $456 and expense of $560, respectively 332 907
--- --- Net earnings $11,425 13,308 ======= ====== Earnings per
share: Basic Continuing operations 0.42 0.48 Discontinued
operations 0.02 0.03 ---- ---- Net earnings $0.44 0.51 ===== ====
Diluted Continuing operations 0.42 0.47 Discontinued operations
0.01 0.03 ---- ---- Net earnings $0.43 0.50 ===== ==== Average
common shares O/S: Basic 26,241 25,977 ====== ====== Diluted 26,586
26,402 ====== ====== ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts) Nine Nine Months
Months Ended Ended June 30, June 30, 2009 2008 ------- ------- Net
Sales $449,615 421,023 Cost and Expenses: Cost of sales 272,880
251,858 SG&A 114,158 108,882 Amortization of intangible assets
14,379 12,377 Interest expense 5,961 7,101 Other expenses, net
2,860 164 ----- --- Total costs and expenses 410,238 380,382
------- ------- Earnings before income taxes 39,377 40,641 Income
taxes 11,839 12,945 ------ ------ Net earnings from continuing
operations 27,538 27,696 Earnings (loss) from discontinued
operations, net of tax benefit of $568 and $565, respectively 135
(516) Loss on sale from discontinued operations, net of tax benefit
of $905 and expense of $4,809, respectively (32) (4,974) --- ------
Net earnings (loss) from discontinued operations 103 (5,490) ---
------ Net earnings $27,641 22,206 ======= ====== Earnings per
share: Basic Continuing operations 1.05 1.07 Discontinued
operations 0.01 (0.21) ---- ----- Net earnings $1.06 0.86 =====
==== Diluted Continuing operations 1.04 1.05 Discontinued
operations 0.00 (0.21) ---- ----- Net earnings $1.04 0.84 =====
==== Average common shares O/S: Basic 26,176 25,862 ====== ======
Diluted 26,494 26,290 ====== ====== ESCO TECHNOLOGIES INC. AND
SUBSIDIARIES Condensed Business Segment Information (Unaudited)
(Dollars in thousands) Three Months Ended Nine Months Ended June
30, June 30, 2009 2008 2009 2008 ---- ---- ---- ---- Net Sales
--------- Utility Solutions Group $91,113 87,335 273,380 240,771
Test 29,108 33,039 98,310 98,599 Filtration 27,881 30,977 77,925
81,653 ------ ------ ------ ------ Totals $148,102 151,351 449,615
421,023 ======== ======= ======= ======= EBIT ----- Utility
Solutions Group $13,158 16,182 39,851 42,147 Test 3,400 2,794
10,382 7,526 Filtration 4,837 5,216 11,927 13,778 Corporate (5,378)
(1) (5,482) (2) (16,822) (3) (15,709) (4) ------ ------ -------
------- Consolidated EBIT 16,017 18,710 45,338 47,742 Less:
Interest expense (1,587) (2,572) (5,961) (7,101) ------ ------
------ ------ Earnings before income taxes $14,430 16,138 39,377
40,641 ======= ====== ====== ====== Note: Depreciation and
amortization expense was $7.6 million and $7.1 million for the
quarters ended June 30, 2009 and 2008, respectively, and $22.7
million and $19.5 million for the nine-month periods ended June 30,
2009 and 2008, respectively. (1) Includes $1.2 million of
amortization of acquired intangible assets. (2) Includes $1.2
million of amortization of acquired intangible assets. (3) Includes
$3.5 million of amortization of acquired intangible assets. (4)
Includes $3.0 million of amortization of acquired intangible
assets. ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Reconciliation of
Non-GAAP Financial Measures (Unaudited) EPS - Operational - Q3 FY
2009 and YTD Q3 FY 2009
------------------------------------------------- Q3 FY 2009 YTD Q3
FY 2009 ---------- -------------- EPS - GAAP $0.42 $1.04
Adjustments (1) 0.07 0.07 ----- ----- EPS - Operational $0.49 $1.11
===== ===== (1) Adjustments exclude the $2.3 million of Aclara RF
facility exit/relocation costs. EPS - Operational and EPS -
Adjusted Basis Reconciliation - FY 2009
-------------------------------------------------------------------
EPS - GAAP - FY 2009 Range $1.82 1.87 Adjustments (1) 0.07 0.07
----- ---- EPS - Operational Basis $1.89 1.94 Adjustments (2) 0.42
0.42 ----- ---- EPS - Adjusted Basis - FY 2009 Range $2.31 2.36
===== ==== (1) Adjustments exclude the Aclara RF facility
exit/relocation costs. (2) Adjustments exclude the 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) June 30, September 30, 2009 2008 -------- -------------
Assets ------ Cash and cash equivalents $29,450 28,667 Accounts
receivable, net 113,102 134,710 Costs and estimated earnings on
long-term contracts 3,395 9,095 Inventories 86,983 65,019 Current
portion of deferred tax assets 16,635 15,368 Other current assets
22,110 14,888 Current assets from discontinued operations - 2,889
--- ----- Total current assets 271,675 270,636 Property, plant and
equipment, net 69,895 72,353 Goodwill 330,090 328,878 Intangible
assets, net 224,304 236,192 Other assets 18,588 17,665 Other assets
from discontinued operations - 2,349 --- ----- $914,552 928,073
======== ======= Liabilities and Shareholders' Equity
------------------------------------ Short-term borrowings and
current maturities of long-term debt $50,000 50,000 Accounts
payable 40,541 48,982 Current portion of deferred revenue 20,431
18,226 Other current liabilities 45,307 49,934 Current liabilities
from discontinued operations - 1,541 --- ----- Total current
liabilities 156,279 168,683 Deferred tax liabilities 81,519 83,515
Other liabilities 23,689 23,988 Long-term debt 152,485 183,650
Shareholders' equity 500,580 468,237 ------- ------- $914,552
928,073 ======== ======= ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in
thousands) Nine Months Ended June 30, 2009 ----------------- Cash
flows from operating activities: Net earnings $27,641 Adjustments
to reconcile net earnings to net cash provided by operating
activities: Net earnings from discontinued operations (103)
Depreciation and amortization 22,692 Stock compensation expense
3,176 Changes in current assets and liabilities (14,098) Effect of
deferred taxes (4,646) Change in deferred revenue and costs, net
2,311 Other 10 --- Net cash provided by operating activities -
continuing operations 36,983 Net cash provided by operating
activities - discontinued operations 142 --- Net cash provided by
operating activities 37,125 ====== Cash flows from investing
activities: Acquisition of business (1,250) Additions to
capitalized software (3,419) Capital expenditures - continuing
operations (6,898) ------ Net cash used by investing activities -
continuing operations (11,567) Proceeds from divestiture of
business, net - discontinued operations 3,100 ----- Net cash used
by investing activities (8,467) ------ Cash flows from financing
activities: Proceeds from long-term debt 29,000 Principal payments
on long-term debt (60,165) Proceeds from exercise of stock options
3,155 Other 1,080 ----- Net cash used by financing activities
(26,930) ------- Effect of exchange rate changes on cash and cash
equivalents (945) ---- Net decrease in cash and cash equivalents
783 Cash and cash equivalents, beginning of period 28,667 ------
Cash and cash equivalents, end of period $29,450 ======= ESCO
TECHNOLOGIES INC. AND SUBSIDIARIES Other Selected Financial Data
(Unaudited) (Dollars in thousands) Backlog And Entered Orders -
Utility Q3 FY 2009 Solutions Test Filtration Total
----------------------------- --------- ---- ---------- -----
Beginning Backlog - 3/31/09 continuing opers $124,736 56,547 79,541
260,824 Entered Orders 103,586 32,810 21,172 157,568 Sales (91,113)
(29,108) (27,881) (148,102) ------- ------- ------- -------- Ending
Backlog - 6/30/09 $137,209 60,249 72,832 270,290 ======== ======
====== ======= Backlog And Entered Orders - Utility YTD Q3 FY 2009
Solutions Test Filtration Total -----------------------------
--------- ---- ---------- ----- Beginning Backlog - 9/30/08
continuing opers $124,847 69,823 71,463 266,133 Entered Orders
285,742 88,736 79,294 453,772 Sales (273,380) (98,310) (77,925)
(449,615) -------- ------- ------- -------- Ending Backlog -
6/30/09 $137,209 60,249 72,832 270,290 ======== ====== ======
======= DATASOURCE: ESCO Technologies Inc. CONTACT: Patricia K.
Moore, Director, Investor Relations of ESCO Technologies Inc.,
+1-314-213-7277; or media, David P. Garino, +1-314-982-0551, for
ESCO Technologies Inc. Web Site: http://www.escotechnologies.com/
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