INVESTOR NEWS

ESCO Announces Fiscal 2010 Fourth Quarter Results; Reports Record Fourth Quarter Sales and Earnings

ST. LOUIS, Nov. 11, 2010 /PRNewswire via COMTEX/ --

ESCO Technologies Inc. (NYSE: ESE) today reported its operating results for the fourth quarter and fiscal year ended September 30, 2010.

EPS is presented from "Continuing Operations" and "Discontinued Operations". Fiscal 2009 discontinued operations include the results of Comtrak which was sold in March 2009.

Fourth Quarter 2010 Summary

• Net sales were a record $207.9 million, an increase of $38.5 million, or 22.7 percent, over Q4 2009 sales of $169.4 million;
• Sequentially, Q4 2010 net sales increased $50.3 million, or 31.9 percent, over Q3 2010 sales of $157.6 million;
• Earnings before income taxes were $36.6 million, representing a 54-percent increase over Q4 2009 earnings before income taxes of $23.8 million;
• The effective tax rate in Q4 2010 was 34.8 percent, contrasted with 8.5 percent in Q4 2009. The 2009 tax rate reflected the favorable settlement of uncertain tax positions;
• EPS was $0.89 per share, an increase of $0.07 per share over Q4 2009 EPS of $0.82 per share. The lower tax rate in 2009 positively impacted 2009's EPS by $0.19 per share;
• Sequentially, Q4 2010 EPS increased $0.34 per share, or 61.8 percent, over Q3 2010 EPS of $0.55 per share;
• Net cash provided by operating activities was $51.1 million during Q4 2010; and
• Entered orders were $161.8 million in the quarter, bringing 2010 total orders to a record $668.8 million, resulting in an annual book-to-bill ratio of 1.1x and firm backlog of $360.6million at September 30, 2010.

Chairman's Commentary

Vic Richey, Chairman and Chief Executive Officer, commented, "I am extremely pleased with our fourth quarter results as we showed meaningful growth on all operating fronts compared to our 2009 fourth quarter. We continue to focus on sales growth and executing our operating plan, and again demonstrated our success in the fourth quarter.

"Fourth quarter sales increased $38.5 million over the prior year primarily driven by Aclara's strong COOP deliveries and higher international sales. EBIT increased $12.3 million in the fourth quarter as a result of exceptional operating performance in the Utility Solutions Group (USG), especially at Aclara.

"Filtration delivered a 20.6 percent EBIT margin on strong performances from VACCO and PTI. Test reported an EBIT margin of 13.2 percent as the sales volume increased significantly over the prior year. The Utility Solutions Group was clearly the bright spot in the quarter with an EBIT margin of 25.7 percent compared to 22.5percent in the prior year fourth quarter.

"Coming off our significant nine-month entered orders, I'm very pleased with the $162million in orders we received in Q4, bringing our total 2010 orders to a record $669million.

"I'm extremely satisfied with our overall performance in fiscal 2010, especially given the state of today's challenging global economy. We were able to achieve, and in most cases exceed, our internal operating goals. Our Utility Solutions Group continues to gain momentum, and our ongoing investments in new products and advanced technologies continue to solidify our market position in the fast-growing Smart Grid area. We are fully committed to expanding our product offering and related solutions and being recognized as a leading provider of next generation technologies for the Smart Grid."

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.

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on January 20 to stockholders of record on January 6.

Fiscal Year 2011

Management's expectations for fiscal year 2011 include the following assumptions and comparisons to fiscal year 2010:

• Sales are expected to increase approximately 10 to 15 percent, in spite of PG&E's Gas AMI revenues decreasing approximately $30 million in 2011 as the contract winds down;
• Incremental investments included in SG&A within the USG segment are expected to be approximately $10 million higher than in 2010. These additional expenditures are related to the development of several new Smart Grid applications, global market expansion initiatives, and pre-deployment costs expected to be incurred in advance of the Southern California Gas Co. (SoCalGas) AMI project;
• USG margins are expected to decrease due to the incremental investments noted above. However, Filtration and Test segment EBIT margins are expected to increase;
• GAAP EPS is expected to grow approximately 10 to 15 percent in 2011 in spite of the significant incremental investments being made throughout the USG segment;
• The 2011 effective tax rate is expected to be approximately 37 percent;
• Aclara is expected to sign the definitive agreement for the SoCalGas AMI project during mid-fiscal 2011. Only a small amount of SoCalGas revenue is projected during 2011 as the project is expected to ramp up during the second half of the fiscal year; and
• On a quarterly basis, Management expects 2011 revenues and EPS to be second half weighted, but not as severely as during 2010.

Chairman's Commentary - 2011

Mr. Richey concluded, "I am very pleased with our sales and EPS outlook for 2011, as well as our significant growth prospects over the next three years. We have a sizeable amount of specific, identifiable growth opportunities that should manifest themselves into orders and sales over that time frame. The significant amount of 2011 sales expected from current backlog provides reasonable visibility into our near-term sales and profit outlook. On the international growth front, our new business opportunities, including the potential expansion of several current deployments over the next few years, is very exciting.

"We expect our near-term growth projections will be led by the largest AMI gas project in North America, supplemented by our international AMI opportunities in Mexico, South America and Asia, and complemented by our expected domestic growth across all three operating segments.

"Our COOP, Gas and Water AMI business opportunities remain very strong, and our market-leading position at Doble should allow us to migrate our domestic success to our targeted international opportunities.

"I remain very optimistic about our current business prospects, including our new product roadmap in USG where we are investing heavily in 2011. I believe this significant investment will pay us back over the next couple of years with meaningful growth opportunities, both domestically and internationally.

"Our commitment remains the same -- to achieve our long-term goal of increasing shareholder value."

Conference Call

The Company will host a conference call today, November 11, at 4 p.m. Central Time, to discuss the Company's fourth quarter and fiscal year 2010 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 7426884).

Forward-Looking Statements

Statements in this press release regarding the amount and timing of the Company's expected 2011 revenues, margins, EPS, sales, incremental investments, program management costs, the Company's 2011 effective tax rate, the likelihood, timing and revenue associated with the anticipated SoCalGas AMI contract, growth opportunities in the future, success in capturing international and domestic AMI opportunities, success of new products and technologies, the long-term success of the Company, and any other 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, 2009; the success of negotiations between SoCalGas and the Company; changes in requirements of SoCalGas; SoCalGas' ability to successfully negotiate appropriate terms and conditions with other subcontractors and project participants; financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to the SoCalGas project; the success of the Company's competitors; changes in Federal or State energy laws; 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 and availability of certain raw materials including steel and copper; worldwide availability of electronic components; 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 www.escotechnologies.com.

SOURCE ESCO Technologies Inc.