ESCO Announces First Quarter Results and Reconfirms Total Year Revenue and EPS Guidance
Chairman's Commentary - First Quarter 2009
"Additionally during the quarter we incurred certain R&D project costs earlier in the year versus plan on a few near-term Space program opportunities at VACCO, and incurred additional development and re-design costs on our RF electric product.
"During the first quarter we generated over
"We will continue our disciplined approach and diligence so that we can execute to our 2009 Plan and demonstrate ESCO's resiliency in these challenging economic times."
First Quarter Summary
The prior year first quarter results included the cumulative recognition
of
Net earnings and EPS are presented from "Continuing Operations" and
"Discontinued Operations." Continuing Operations represent the results of the
ongoing businesses of the Company, and Discontinued Operations represent the
2008 results of the filtration portion of Filtertek which was sold on
Continuing Operations
Sales were
EPS was
Net cash provided by operating activities was
Discontinued Operations
Discontinued Operations for the first quarter of fiscal 2008 represent the
results of the filtration portion of Filtertek. The first quarter 2008 net
loss of
Sales
- Doble sales increased
$13.8 million over prior year reflecting the
impact of a full quarter of operations versus one month in the 2008
first quarter;
- Fixed network RF AMI sales increased
$20.8 million (112 percent) in the
2009 first quarter primarily due to higher gas product deliveries at
- Fixed network PLS AMI sales decreased
$27.1 million in the 2009 first quarter as TWACS(R) deliveries toPG&E were $0 in the current period compared to$22.4 million in the prior year's first quarter (including the$20.5 million of TNG Revenue Recognition sales); and, - Sales of software and digital video security products increased a
combined
$3.2 million in the 2009 first quarter.
Test segment sales increased 10.7 percent in the first quarter of 2009 primarily due to an increase in large chamber deliveries to the international wireless and electronics end-markets.
Filtration segment sales increased slightly in the first quarter of 2009
reflecting sales increases in the defense aerospace product line, partially
offset by lower commercial aerospace product deliveries resulting from the
impact of the
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 first quarter of fiscal 2009 included the following:
In the USG segment, EBIT for the 2009 first quarter was
In the Test segment, EBIT dollars and EBIT margins were significantly higher in 2009 due to the sales increases in the current quarter, favorable changes in sales mix, and rigorous cost controls.
In the Filtration segment, EBIT dollars and EBIT margins decreased in 2009 due to the timing of research and development costs, and higher bid and proposal costs being 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 first quarter of
2009 was 30.1 percent compared to 37.7 percent in the first quarter of 2008.
The 2009 tax rate was favorably impacted by Congress' extension of the
research tax credit during the 2009 first quarter. The 2009 first quarter tax
rate was consistent with the Company's guidance provided in
New Orders
New orders received in the first quarter were
Orders from
Cumulative orders-to-date for the
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,
Management is currently evaluating its strategic alternatives involving Comtrak and is currently in negotiations with a third party to purchase certain assets and assume certain liabilities of Comtrak. Management is planning to formally exit this business within the next 60 days, and the results of operations of Comtrak will be accounted for as Discontinued Operations beginning in the second quarter of fiscal 2009. Net cash proceeds from this action will be used to further pay down debt.
Revenues and Earnings Per Share - 2009 In fiscal 2009, Management expects the following:
- Revenues between
$680 million and$690 million ; - EPS - GAAP Basis of between
$2.00 and$2.15 (which includes approximately$0.05 per share of expenses related to the Aclara RF facility relocation charge noted above); and, - EPS - Adjusted Basis of between
$2.42 and$2.57 per share.
EPS - Adjusted Basis excludes approximately
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 35 to 37 percent, with quarterly variations depending on the timing and amount of discrete tax benefits and charges.
The 2009 quarterly earnings profile is projected to be back-end loaded,
but not as severely as fiscal 2008. Management expects second quarter EPS to
be in the range of
Chairman's Commentary - 2009
Mr. Richey further commented, "As noted above, I remain optimistic about
the balance of fiscal 2009, and through our rigorous oversight and disciplined
planning processes, I remain confident that we have sufficient growth
opportunities and the right contingency plans in place to allow us to execute
to our plan as we navigate our way through this challenging economic period.
Having Doble and LDIC for the full year and beginning our AMI deployments with
Conference Call
The Company will host a conference call today,
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, fiscal 2009 second quarter EPS, costs incurred with the
Aclara RF relocation and new building, the timing and impact of exiting the
Comtrak business, the fiscal 2009 effective annual tax rate, the timing and
certainty of utility customer spending, the success of international AMR / AMI
pilots and the success of international opportunities, 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
ESCO, headquartered in
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Three Months
Ended Ended
December 31, December 31,
2008 2007
Net Sales $149,171 134,957
Cost and Expenses:
Cost of sales 93,561 84,012
SG&A 40,054 33,510
Amortization of intangible assets 4,734 3,597
Interest expense 2,619 1,359
Other (income) expenses, net (118) (214)
Total costs and expenses 140,850 122,264
Earnings before income taxes 8,321 12,693
Income taxes 2,501 4,788
Net earnings from continuing operations 5,820 7,905
Loss from discontinued operations,
net of tax of $325 - (115)
Loss on sale from discontinued operations,
net of tax of $4,809 - (4,974)
Net earnings from discontinued
operations - (5,089)
Net earnings $5,820 2,816
Earnings per share:
Basic
Continuing operations 0.22 0.31
Discontinued operations 0.00 (0.20)
Net earnings $0.22 0.11
Diluted
Continuing operations 0.22 0.30
Discontinued operations 0.00 (0.19)
Net earnings $0.22 0.11
Average common shares O/S:
Basic 26,108 25,759
Diluted 26,422 26,202
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 31,
2008 2007
Net Sales
Utility Solutions Group $ 90,015 79,309
Test 35,489 32,065
Filtration 23,667 23,583
Totals $149,171 134,957
EBIT
Utility Solutions Group $ 10,525 13,408
Test 3,234 1,990
Filtration 2,863 3,649
Corporate (5,682)(1) (4,995)(2)
Consolidated EBIT 10,940 14,052
Interest (expense)/income (2,619) (1,359)
Earnings before income taxes $8,321 12,693
Note: Depreciation and amortization expense was $7.5 million and $5.7
million for the quarters ended December 31, 2008 and 2007.
(1) Includes $1.2 million of amortization of acquired intangible assets.
(2) Includes $0.7 million of amortization of acquired intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
EPS from Continuing Operations-Adjusted Basis Reconciliation (prior year first quarter)
Q1 08
EPS - GAAP Basis $0.30
Adjustments (defined below) (0.20)
EPS - Adjusted Basis $0.10
Adjustments exclude the recognition of deferred revenue and profit related
to previous period electric AMI shipments to
EPS-Adjusted Basis Reconciliation-FY 2009
EPS - GAAP Basis - FY 2009 Range $2.00 2.15
Adjustments (defined below) 0.42 0.42
EPS - Adjusted Basis - FY 2009 Range $2.42 2.57
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)
December 31, September 30,
2008 2008
Assets
Cash and cash equivalents $28,433 28,667
Accounts receivable, net 106,292 135,436
Costs and estimated earnings on
long-term contracts 8,477 9,095
Inventories 75,900 66,962
Current portion of deferred tax assets 15,984 15,368
Other current assets 11,540 15,108
Total current assets 246,626 270,636
Property, plant and equipment, net 71,866 72,591
Goodwill 329,775 328,878
Intangible assets, net 233,276 238,223
Other assets 18,174 17,745
$899,717 928,073
Liabilities and Shareholders' Equity
Short-term borrowings and current
maturities of long-term debt $50,000 50,000
Accounts payable 41,875 49,329
Current portion of deferred revenue 19,663 18,920
Other current liabilities 43,274 50,434
Total current liabilities 154,812 168,683
Long-term portion of deferred revenue 1,962 2,228
Deferred tax liabilities 84,091 83,515
Other liabilities 20,866 21,760
Long-term debt 165,573 183,650
Shareholders' equity 472,413 468,237
$899,717 928,073
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 31, 2008
Cash flows from operating activities:
Net earnings $ 5,820
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 7,534
Stock compensation expense 1,017
Changes in operating working capital 9,590
Effect of deferred taxes (1,695)
Change in deferred revenues and costs, net 565
Pension contributions (630)
Other (1,081)
Net cash provided by operating activities 21,120
Cash flows from investing activities:
Additions to capitalized software (875)
Capital expenditures (1,969)
Net cash used by investing activities (2,844)
Cash flows from financing activities:
Proceeds from long-term debt 15,000
Principal payments on long-term debt (33,077)
Excess tax benefit from stock options
exercised 782
Proceeds from exercise of stock options 400
Other (1,615)
Net cash provided by financing activities (18,510)
Net decrease in cash and cash equivalents (234)
Cash and cash equivalents, beginning of period 28,667
Cash and cash equivalents, end of period $ 28,433
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered Utility
Orders - Q1 FY 2009 Solutions Test Filtration Total
Beginning Backlog
- 9/30/08
continuing opers $125,543 69,823 71,463 266,829
Entered Orders 86,504 29,902 24,710 141,116
Sales (90,015) (35,489) (23,667) (149,171)
Ending Backlog - 12/31/08 $122,032 64,236 72,506 258,774
SOURCE
CONTACT:
Technologies Inc.
+1-314-982-0551, for
Web site: http://www.escotechnologies.com
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