ESCO Reports Fiscal 2009 Results and Announces Initiation of Quarterly Cash Dividend
2009 Highlights
-- EPS from Continuing Operations was $0.82 in the fourth quarter and $1.86
for the year.
-- Favorable settlement of uncertain tax positions in the 2009 fourth
quarter positively affected EPS for the quarter and the full year by
$0.19 .
-- Cash from operations was $40.5 million in the quarter, and $77.6 million
for the year.
-- As a result of the strong cash flow, net debt outstanding decreased 34
percent to $130.6 million at September 30, 2009 , reflecting a leverage
ratio of 1.86x.
-- Entered orders of $180.2 million were recorded in the fourth quarter and
$634.0 million for the year, which resulted in book-to-bill ratios
greater than 1.0x, respectively.
-- Firm order backlog increased during the quarter and the fiscal year to
an all-time high.
Operating Results
The following table presents EPS for the fourth quarters and fiscal years ended
Fourth Quarter: 2009 2008
--------------- ---- ----
EPS - Continuing Operations $0.82 0.75
EPS - Discontinued Operations $0.00 0.18
----- ----
EPS $0.82 0.93
===== ====
Total Year:
-----------
EPS - Continuing Operations $1.86 1.81
EPS - Discontinued Operations $0.00 (0.03)
----- ----
EPS $1.86 1.78
===== ====
EPS is presented from "Continuing Operations" and "Discontinued Operations." Discontinued Operations represent the results of Comtrak which was sold in
Effective Tax Rate
In
The effective tax rates were 8.5 percent and 35.1 percent in the fourth quarters of 2009 and 2008, respectively, and 22.0 percent and 33.3 percent for the fiscal years 2009 and 2008, respectively. The favorable tax rates in all of the comparable periods noted were the result of varying degrees of income tax benefits and credits realized in the respective periods.
Cash Flow
Cash flow from operating activities generated
Entered Orders
Entered orders in the 2009 fourth quarter were
Order Highlights Include:
-- Fourth quarter Aclara RF AMI gas products with PG&E were $6.5 million ,
bringing total PG&E gas project orders to 3.5 million units and $199
million to date.
-- Aclara RF AMI water products with New York City were $4.9 million in the
fourth quarter, bringing the total project to 493,000 units and $39.1
million to date.
-- Aclara PLS AMI products in the fourth quarter were $35.2 million ,
bringing total year orders to $123.8 million , up from $121.6 million in
2008.
-- Aclara PLS orders from COOPs and Munis were $87.9 million in 2009
compared to $82.1 million in 2008. Fiscal 2009 includes $5.4 million of
load control / demand response devices.
-- VACCO multi-year fluid flow product orders for the Navy's Virginia Class
submarine were $32.2 million during the fourth quarter.
-- TekPackaging orders for Thermoscan® ear thermometer probe covers were
$11.7 million during the fourth quarter.
Chairman's Commentary
Mr. Richey further commented, "I am extremely pleased with our 2009 operating results. Given the state of today's challenging global economy, being able to generate nearly
"Our Aclara 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. The recent announcement of our development of the Aclara Smart Communications Network solution, which is a revolutionary, high-bandwidth, high-speed, wide area network for utility customers, is further evidence of our commitment to expand our position as a leading provider of next generation technologies for the Smart Grid.
"Like others in the AMI market, during 2009 we experienced delays of some expected orders and sales as a result of the uncertainty surrounding the government's Stimulus Program. Several of our customers who participated in the Grant Program delayed placing orders and taking deliveries until the DOE announced the selection results. The customers' goal was to maximize the impact of the available grant money, and with this uncertainty now resolved, we fully expect to see a meaningful amount of progress. Based on the grant recipients identified, and with our participation in many of these projects being finalized, our confidence in the future remains high.
"Strategically, we are maintaining our focus on creating significant growth, and we will continue to focus our R&D and engineering spending toward new product development initiatives in the domestic AMI / Smart Grid area, as well as expanding our position in the international AMI market.
"We are making substantial progress with a number of large AMI projects and customers in our international pipeline, and we are enthused with our near-term order prospects in
"While I am very enthusiastic about the significant number of opportunities in front of us currently, the ongoing uncertainties of today's economy, the delays associated with the Stimulus Program, and the timing of other customers finalizing their AMI deployment schedules have caused us to have a more conservative perspective as we address fiscal 2010. As discussed in the Business Outlook section of this release, we are taking a cautious approach to our near-term outlook and expectations to reflect these uncertainties.
"I am confident that given our new products currently being introduced, the strength and size of our domestic and international business prospects, and acquisition opportunities that are currently under review, we are well positioned for the future."
Sales
Fourth quarter sales were
Utility
Test sales in 2009 decreased in the fourth quarter and full year primarily due to the timing of large chamber deliveries to the international wireless and electronics end-markets.
Filtration sales in 2009 decreased in the fourth quarter and total year as sales increases in the defense aerospace and space product lines at VACCO were offset by lower commercial aerospace product deliveries at PTI.
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 fourth quarter and fiscal year 2009 included the following:
In the USG segment, EBIT for the 2009 fourth quarter was
The 2009 USG EBIT was negatively impacted by approximately
Additionally, the 2009 USG EBIT comparison was significantly impacted by the 2008 EBIT contribution of
In the Test segment, EBIT dollars and EBIT margins were lower in the 2009 fourth quarter due to the lower sales volume, but higher for the year in 2009 due to favorable changes in sales mix and effective cost management 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 fourth quarter of 2009, Filtration's EBIT margins were consistent with prior year on lower sales due to stringent cost management across the segment.
Corporate operating costs were higher in 2009 due to higher amortization expenses related to recent acquisitions that included identifiable intangible assets, higher stock compensation expenses and higher professional fees.
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.
TWACS NG Software Update
In
FY 2010 versus 2009
During 2010, Management anticipates gas AMI product deliveries to
On the positive side, a number of domestic and international projects across the Company will show meaningful increases in sales and EBIT in 2010, which will contribute significantly toward offsetting the
As a result, Management expects 2010 consolidated revenues to decrease approximately three to five percent and EBIT to decline marginally compared to 2009. In addition, the 2010 effective tax rate is projected to be more normalized at 38 percent, as Management does not expect to realize the same amount of tax benefits and credits during 2010 as were realized in 2009.
Given the
The Company continues to be actively engaged in several large domestic and international projects across all three operating segments that have the ability to favorably impact EPS in 2010 and beyond.
Management has decided to defer providing specific 2010 guidance due to the significant size and uncertain timing of the numerous projects in which the Company is currently engaged. Combined with the impact of the global economic recovery, Management believes the specific financial impact and timing of these large projects will be more quantifiable in the future, and therefore believes it is prudent to defer providing specific EPS guidance at this time.
Chairman's Commentary - Wrap-Up
Mr. Richey concluded, "We have a sizeable amount of specific, identifiable growth opportunities that should manifest themselves into orders and sales in varying degrees throughout fiscal 2010. Some of these opportunities are on projects where we have already been selected, and others are opportunities where we view ourselves as the front-runner in the selection process. I expect 2010 to be a year of significant activity as many of these projects materialize and firmly set us up for meaningful growth in sales and earnings over the next few years and beyond. I remain very optimistic about our current business prospects both domestically and internationally. Through our disciplined planning process and management oversight, I am confident that we have sufficient opportunities and the appropriate contingencies in place to allow us to execute our strategic plan. 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,
Forward-Looking Statements
Statements in this press release regarding the likelihood, timing and size of potential projects and contracts which the Company may receive or participate in, amounts and timing of fiscal 2010 future revenues, results, earnings, EPS, AMI customers' responses to the availability of Grant Program funds, sales growth, orders, growth, the success in capturing international AMI opportunities, increased market share in the Smart Grid area, success of new products and technologies, 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
- tables attached -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Three Months
Ended Ended
September 30, September 30,
2009 2008
---- ----
Net Sales $169,449 192,543
Cost and Expenses:
Cost of sales 99,471 116,093
SG&A 38,239 38,442
Amortization of intangible assets 4,835 4,667
Interest expense 1,489 2,707
Other expenses, net 1,620 (3)
----- ---
Total costs and expenses 145,654 161,906
------- -------
Earnings before income taxes 23,795 30,637
Income taxes 2,028 10,764
----- ------
Net earnings from continuing operations 21,767 19,873
Earnings from discontinued operations, net of tax
benefit of $4,508 - 4,632
--- -----
Net earnings $21,767 24,505
======= ======
Earnings per share:
Basic
Continuing operations 0.83 0.76
Discontinued operations - 0.18
---- ----
Net earnings $0.83 0.94
===== ====
Diluted
Continuing operations 0.82 0.75
Discontinued operations - 0.18
---- ----
Net earnings $0.82 0.93
===== ====
Average common shares O/S:
Basic 26,332 26,052
====== ======
Diluted 26,652 26,452
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Year Ended Year Ended
September 30, September 30,
2009 2008
---- ----
Net Sales $619,064 613,566
Cost and Expenses:
Cost of sales 372,351 367,951
SG&A 152,397 147,324
Amortization of intangible assets 19,214 17,044
Interest expense 7,450 9,808
Other expenses, net 4,480 161
----- ---
Total costs and expenses 555,892 542,288
------- -------
Earnings before income taxes 63,172 71,278
Income taxes 13,867 23,709
------ ------
Net earnings from continuing operations 49,305 47,569
Earnings (loss) from discontinued operations,
net of tax of $568 and $229, respectively 135 (282)
Loss on sale from discontinued operations,
net of tax of $905 and $157, respectively (32) (576)
--- ----
Net earnings (loss) from discontinued
operations 103 (858)
--- ----
Net earnings $49,408 46,711
======= ======
Earnings per share:
Basic
Continuing operations 1.88 1.84
Discontinued operations - (0.04)
---- -----
Net earnings $1.88 1.80
===== ====
Diluted
Continuing operations 1.86 1.81
Discontinued operations - (0.03)
---- -----
Net earnings $1.86 1.78
===== ====
Average common shares O/S:
Basic 26,216 25,909
====== ======
Diluted 26,560 26,315
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended Year Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
-----------
Utility Solutions
Group $100,621 111,883 374,001 352,654
Test 40,035 46,171 138,345 144,770
Filtration 28,793 34,489 106,718 116,142
------ ------ ------- -------
Totals $169,449 192,543 619,064 613,566
======== ======= ======= =======
EBIT
-----
Utility Solutions
Group $22,617 24,412 62,468 66,559
Test 3,752 6,351 14,134 13,877
Filtration 6,129 7,417 18,056 21,195
Corporate (7,214) (1) (4,836) (2) (24,036) (3) (20,545) (4)
------ ------ ------- -------
Consolidated EBIT 25,284 33,344 70,622 81,086
Less: Interest
expense (1,489) (2,707) (7,450) (9,808)
------ ------ ------ ------
Earnings before
income taxes $23,795 30,637 63,172 71,278
======= ====== ====== ======
Note: Depreciation and amortization expense was $7.6 million and
$7.6 million for the quarters ended September 30, 2009 and 2008,
respectively, and $30.3 million and $27.1 million for the years
ended September 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 $4.7 million of amortization of acquired intangible assets.
(4) Includes $4.2 million of amortization of acquired intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
September 30, September 30,
2009 2008
---- ----
Assets
------
Cash and cash equivalents $44,630 28,667
Accounts receivable, net 108,620 134,710
Costs and estimated earnings on long-term
contracts 10,758 9,095
Inventories 82,020 65,019
Current portion of deferred tax assets 20,417 15,368
Other current assets 13,750 14,888
Current assets from discontinued operations - 2,889
--- -----
Total current assets 280,195 270,636
Property, plant and equipment, net 69,543 72,353
Goodwill 330,719 328,878
Intangible assets, net 221,600 236,192
Other assets 21,630 17,665
Other assets from discontinued operations - 2,349
--- -----
$923,687 928,073
======== =======
Liabilities and Shareholders' Equity
------------------------------------
Short-term borrowings and current maturities
of long-term debt $50,000 50,000
Accounts payable 47,218 48,982
Current portion of deferred revenue 20,215 18,226
Other current liabilities 46,552 49,934
Current liabilities from discontinued operations - 1,541
--- -----
Total current liabilities 163,985 168,683
Deferred tax liabilities 78,471 83,515
Other liabilities 33,424 23,988
Long-term debt 130,467 183,650
Shareholders' equity 517,340 468,237
------- -------
$923,687 928,073
======== =======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Year Ended
September 30,
2009
----
Cash flows from operating activities:
Net earnings $49,408
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Net earnings from discontinued operations (103)
Depreciation and amortization 30,267
Stock compensation expense 4,866
Changes in current assets and liabilities 1,566
Effect of deferred taxes (2,543)
Change in deferred revenue and costs, net 1,781
Pension contributions (1,997)
Change in other long-term tax liabilities (5,700)
Other (71)
---
Net cash provided by operating activities -
continuing operations 77,474
Net cash provided by operating activities -
discontinued operations 142
---
Net cash provided by operating activities 77,616
------
Cash flows from investing activities:
Acquisition of businesses (6,442)
Additions to capitalized software (5,004)
Change in acquisition escrow 2,189
Capital expenditures (9,255)
------
Net cash used by investing activities - continuing
operations (18,512)
Proceeds from divestiture of business, net -
discontinued operations 3,100
-----
Net cash used by investing activities (15,412)
-------
Cash flows from financing activities:
Proceeds from long-term debt 32,000
Principal payments on long-term debt (85,183)
Proceeds from exercise of stock options 6,621
Other 1,029
-----
Net cash used by financing activities (45,533)
-------
Effect of exchange rate changes on cash and cash
equivalents (708)
----
Net increase in cash and cash equivalents 15,963
Cash and cash equivalents, beginning of period 28,667
------
Cash and cash equivalents, end of period $44,630
=======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered Orders - Utility
Q4 FY 2009 Solutions Test Filtration Total
---------------------------- --------- ---- ---------- -----
Beginning Backlog - 6/30/09
continuing opers $155,532 60,249 72,832 288,613
Entered Orders 77,465 34,026 68,716 180,207
Sales (100,621) (40,035) (28,793) (169,449)
-------- ------- ------- --------
Ending Backlog - 9/30/09 $132,376 54,240 112,755 299,371
======== ====== ======= =======
Backlog And Entered Orders - Utility
FY 2009 Solutions Test Filtration Total
---------------------------- --------- ---- ---------- -----
Beginning Backlog - 9/30/08
continuing opers $143,170 69,823 71,463 284,456
Entered Orders 363,207 122,762 148,010 633,979
Sales (374,001) (138,345) (106,718) (619,064)
-------- -------- -------- --------
Ending Backlog - 9/30/09 $132,376 54,240 112,755 299,371
======== ====== ======= =======
SOURCE
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.
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