SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 10, 2004
ESCO TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Charter)
Missouri 1-10596 43-1554045
(State or Other (Commission (I.R.S. Employer
Jurisdiction of Incorporation) File Number) Identification No.)
8888 Ladue Road, Suite 200, St. Louis, Missouri 63124-2056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 314-213-7200
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
Exhibit No. Description of Exhibit
99.1 Press Release dated August 10, 2004
ITEM 9. REGULATION FD DISCLOSURE
Today, August 10, 2004, the Registrant is issuing a press release announcing its
fiscal 2004 third quarter and first nine months financial and operating results.
This press release is furnished herewith as Exhibit 99.1 and will be posted on
the Registrant's website located at http://www.escotechnologies.com. It can be
viewed through the Investor Relations page of the website under the tab "Press
Releases", although the Registrant reserves the right to discontinue that
availability at any time.
In addition, the Registrant announced in a press release issued on July 16, 2004
that a webcast of a fiscal third quarter conference call would be held on August
10, 2004 at 9:30 am, central time, and that the related press release would be
available on that date.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operations and Financial Information Furnished
Today, the Registrant is issuing a press release (Exhibit 99.1 to this report)
announcing its fiscal 2004 third quarter and first nine months financial and
operating results. See Item 9, Regulation FD Disclosure, above.
Non-GAAP Financial Measures
The press release furnished herewith contains financial measures and financial
terms not calculated in accordance with generally accepted accounting principles
in the United States of America ("GAAP") in order to provide investors and
management with an alternative method for assessing the Registrant's operating
results in a manner that is focused on the performance of the Registrant's
ongoing operations. The Registrant has provided definitions below for the
non-GAAP financial measures utilized in the press release, together with an
explanation of why management uses these measures, and why management believes
that these non-GAAP financial measures are useful to investors. The press
release uses the non-GAAP financial measures of "operational" net earnings,
earnings per share and results of operations and also of "EBIT from continuing
operations," "EBIT margin", "free cash flow from continuing operations" and
Filtration segment "operational" EBIT.
The Registrant defines "operational" net earnings, earnings per share, and
results of operations as net earnings, earnings per share, and results of
operations in accordance with GAAP, except for the exclusion of (i) exit costs
and severance charges related to the shutdown of the Filtration segment Puerto
Rico facility, (ii) asset impairment charges related to the Filtration segment
Puerto Rico facility and Test segment U.K. facility, (iii) severance charges
related to the Test segment U.K. facility, (iv) gain from settlement of patent
litigation related to the Filtration segment, (v) costs resulting from the
Management Transition Agreement between the Registrant and its former Chairman
and (vi) the charge resulting from an equipment lease termination related to the
Whatman Hemasure contract dispute. The Registrant defines "operational" EBIT
margin as EBIT margin (defined below) with the foregoing exclusions. The
Registrant's management uses these "operational" results in evaluating the
measures of continuing operations of the Registrant and believes that this
information provides investors with additional insight into the period over
period financial performance of the Registrant.
The Registrant defines "EBIT from continuing operations" as earnings before
interest and taxes. The Registrant defines "EBIT margin" as EBIT from continuing
operations as a percent of net sales. The Registrant's management evaluates the
performance of its operating segments based on EBIT from continuing operations
and EBIT margin, and believes that EBIT from continuing operations and EBIT
margin are useful to investors to demonstrate the operational profitability of
the Registrant's business segments by excluding interest and taxes, which are
generally accounted for across the entire Registrant on a consolidated basis.
EBIT from continuing operations is also one of the measures used by management
in determining resource allocations within the Registrant and incentive
compensation.
The Registrant defines "Free cash flow from continuing operations" as "Net cash
provided by operating activities-continuing operations" less "Capital
expenditures-continuing operations". The Registrant's management believes that
free cash flow from continuing operations is useful to investors and management
as a supplemental financial measurement in the evaluation of the Registrant's
business and believes that free cash flow may provide additional information
with respect to the Registrant's ability to meet its future debt service,
capital expenditures and working capital requirements. Free cash flow can also
be reinvested in the Registrant for future growth.
The Registrant defines Filtration segment "operational" EBIT as segment EBIT,
excluding the following: (i) exit costs, severance charges and asset impairment
charges related to the shutdown of the Puerto Rico facility, (ii) the gain from
settlement of patent litigation, and (iii) the charge resulting from an
equipment lease termination related to the Whatman Hemasure contract dispute.
The presentation of the information described above is intended to supplement
investors' understanding of the Registrant's operating performance. The
Registrant's non-GAAP financial measures may not be comparable to other
companies' non-GAAP financial performance measures. Furthermore, these measures
are not intended to replace net earnings, cash flows, financial position, or
comprehensive income (loss), as determined in accordance with GAAP.
Other Matters
The information contained in this report, including Exhibit 99.1, shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934 as amended ("Exchange Act") or otherwise subject to the liabilities
of that section, unless the Registrant specifically incorporates it by reference
in a document filed under the Securities Act of 1933 as amended or the Exchange
Act.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCO TECHNOLOGIES INC.
Dated: August 10, 2004 By: /s/ G.E. Muenster
-----------------
G.E. Muenster
Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Press release dated August 10, 2004
Exhibit 99.1
News From
ESCO Technologies
For more information contact: For media inquiries:
Patricia K. Moore David P. Garino
Director, Investor Relations (314) 982-0551
ESCO Technologies Inc.
(314) 213-7277
ESCO ANNOUNCES THIRD QUARTER RESULTS AND
RAISES FISCAL YEAR EARNINGS GUIDANCE
St. Louis, MO, August 10, 2004 - ESCO Technologies Inc. (NYSE: ESE) today
announced its results for the fiscal 2004 third quarter ended June 30, 2004.
The results reflect certain repositioning items that were announced and
described in detail in previous releases in fiscal 2003 and 2004. These included
severance and move charges related to the exit and relocation of Filtertek's
Puerto Rican manufacturing facility; the divestiture of the Microfiltration and
Separations businesses (MicroSep) which is accounted for as "discontinued
operations;" the fiscal 2003 gain related to a patent litigation settlement; and
the fiscal 2003 costs associated with the Management Transition Agreement (MTA)
and the Whatman Manufacturing and Supply Agreement (MSA).
The reconciliation of GAAP reported earnings to "Operational" earnings is
included in the Exhibits attached to this release. The Company believes that the
presentation of "Operational" earnings provides meaningful additional insight
into the Company's performance.
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Add One
Results of Operations (in millions, except EPS)
Sales and net earnings for the fiscal 2004 and 2003 third quarter and nine
month year-to-date periods ended June 30 are noted below:
3rd Qtr. - FY 2004 Sales Net Earnings Diluted EPS
------------------ ----- ------------ -----------
GAAP $107.9M $12.0M $0.90
Operational $107.9M $11.2M $0.84
3rd Qtr. - FY 2003 Sales Net Earnings Diluted EPS
------------------ ----- ------------ -----------
GAAP $90.8M $4.2M $0.32
Operational $90.8M $6.7M $0.51
9 Months YTD - FY 2004 Sales Net Earnings Diluted EPS
---------------------- ----- ------------ -----------
GAAP $306.5M $23.6M $1.77
Operational $306.5M $26.4M $1.98
9 Months YTD - FY 2003 Sales Net Earnings Diluted EPS
---------------------- ----- ------------ -----------
GAAP $291.1M $16.3M $1.25
Operational $291.1M $24.1M $1.84
Sales
-----
Fiscal 2004 third quarter consolidated sales of $107.9 million were $17.1
million, or 19 percent higher than fiscal 2003 third quarter sales. Year-to-date
sales of $306.5 million in fiscal 2004 increased $15.4 million, or 5 percent
versus the similar period in fiscal 2003. Favorable foreign currency values
resulted in approximately $1 million and $5 million of the sales increases
realized in the fiscal 2004 third quarter and year-to-date, respectively, as
compared to prior year.
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Add Two
On a segment basis for the fiscal 2004 third quarter, Communications sales
increased 31 percent, Test sales increased 29 percent and Filtration sales
increased 6 percent, as compared to the prior year third quarter. Year-to-date,
fiscal 2004 Communications sales decreased 7 percent, Test sales increased 26
percent and Filtration sales increased 5 percent as compared to the first nine
months of fiscal 2003.
Communications segment sales increased in the third quarter as a result of
significantly higher shipments of Automatic Meter Reading (AMR) equipment to
electric utility cooperative customers (COOP), as well as sales to two new
investor-owned utility customers (IOUs), Bangor Hydro-Electric Company and Idaho
Power Company. Sales to PPL Electric Utilities Corporation (PPL) decreased
approximately $12 million in the current year's third quarter compared to the
third quarter of fiscal 2003. Sales to PPL were $0.6 million and $20.6 million
in the fiscal 2004 third quarter and nine months, respectively, compared to
$12.5 million and $50.4 million in the prior year third quarter and nine months,
respectively. DCSI's sales to COOP and other customers increased 58 percent
during the first nine months of fiscal 2004 to $76.5 million, from $48.3 million
in the comparable period of fiscal 2003. Year-to-date sales decreased
approximately $1.5 million at DCSI compared to prior year, primarily as a result
of $30 million less sales to PPL in the current year as the contract nears
completion. Sales decreased approximately $5.3 million year-to-date at Comtrak
(SecurVision product) as a result of a delay in deliveries due to a significant
customer requesting a modification of the operating system to provide enhanced
"virus" protection. Deliveries of SecurVision products to this customer are
expected to resume during the fourth quarter of fiscal 2004.
Filtration segment sales increased in fiscal 2004 primarily as a result of
higher defense shipments at VACCO; additional sales of commercial and automotive
products at Filtertek; and, in the year-to-date period, favorable foreign
currency exchange rates related to Filtertek's European operations.
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Add Three
The Test segment sales increased significantly in the current quarter and
year-to-date periods as a result of two significant test chamber installations
in Europe and increased volume from the Company's Asian operations. Also, fiscal
2004 included the results of the acoustics business for nine months versus six
months in the prior year.
Earnings Before Interest and Taxes (EBIT)
- -----------------------------------------
EBIT from continuing operations for the three and nine month periods ended
June 30, 2004 and 2003 was affected by the Puerto Rican facility exit and move
costs (fiscal 2004 and 2003), the patent litigation gain (fiscal 2003) and the
MTA and MSA costs (fiscal 2003). In fiscal 2004, the pretax charges in
continuing operations related to Puerto Rico were zero for the third quarter and
$1.3 million year-to-date. In fiscal 2003, the pretax charges in continuing
operations related to the above items were $3.0 million and $5.9 million for the
third quarter and year-to-date periods, respectively. These items are included
in "Earnings before income taxes" in the Exhibits attached to this release.
On a segment basis, the following items impacted EBIT from continuing
operations as a percent of sales ("EBIT margin") during the third quarter and
nine months of fiscal 2004.
In the Communications segment, EBIT margin is higher than prior year due to
the increased sales volume, favorable sales mix resulting from additional sales
to the COOP market, and cost reductions realized on certain components. In
addition, the fiscal 2003 third quarter sales mix included a significant amount
of lower margin commercial and industrial (C&I) meter modules.
In the Filtration segment, EBIT margin improved in the third quarter of
fiscal 2004 primarily due to higher defense sales at VACCO. The fiscal 2003
third quarter and year-to-date amounts were impacted by the Puerto Rico exit and
move costs and the patent litigation gain.
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Add Four
Year-to-date in fiscal 2004, EBIT margin in the Filtration segment was impacted
by the exit and move costs incurred and the inefficiencies being absorbed at
Filtertek during the first six months of fiscal 2004 as a result of operating in
both the Puerto Rico and Juarez facilities. The move out of Puerto Rico was
completed in mid-March 2004, and the facility is still being actively marketed
for sale. Filtration EBIT was also negatively impacted by the lower sales of
commercial aerospace products.
In the Test segment, EBIT margin improved in the current fiscal year as a
result of the significantly higher sales volume recognized in fiscal 2004. The
fiscal 2003 amounts included costs associated with the U.K. facility
consolidation mentioned in earlier releases.
New Orders and Cash Flow
- ------------------------
New orders received during fiscal 2004 were $96.6 million and $291.7
million for the third quarter and nine-month period, resulting in a backlog at
June 30, 2004 of $248.2 million. New orders received during the first nine
months of fiscal 2004 in Filtration, Communications and Test were $126.6
million, $89.2 million, and $75.9 million, respectively.
During the first nine months of fiscal 2004, the Company generated $22.9
million of free cash flow from continuing operations. Discontinued operations
used $4.1 million of free cash flow. Free cash flow from continuing operations
is defined as "Net Cash Provided by Operating Activities - Continuing
Operations" less "Capital Expenditures - Continuing Operations." For a
reconciliation of free cash flow, see the Exhibits attached to this release.
Stock Repurchase Program
On August 4, 2004, the Company's Board of Directors approved an extension
of the previously authorized stock repurchase program, whereby the Company can
currently purchase up to 1.1 million of its outstanding shares through the
period ending September 30, 2006. The original authorization was for 1.3 million
shares, and the Company has repurchased approximately 200,00 shares under this
program since the original authorization in fiscal 2001.
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Add Five
MicroSep Divestiture
- --------------------
During the fiscal 2004 third quarter, the Company sold its MicroSep
businesses in two separate transactions for approximately $23 million in cash.
The transactions were detailed in earlier releases.
Chairman's Commentary
- ---------------------
Victor L. Richey, Chairman and Chief Executive Officer, commented, "I am
particularly gratified by the strength of our third quarter results in that they
are the product of both the repositioning plan we initiated a year ago, and the
ongoing focus on our cost and competitive position across all of our businesses.
"While throughout the year we had consistently expected a strong second
half, our current expectations, as outlined in the Business Outlook Section of
this release, are considerably better than our previous view. The incremental
improvement is for the most part driven by the Communications segment. Perhaps
more important though is the fact that we expect all three of our segments to
make meaningful contributions throughout the second half of fiscal 2004.
"In addition to completing the divestiture of the MicroSep businesses, we
accomplished a number of other things in the third quarter which were
noteworthy.
"In the Test Segment, we were selected by Boeing to provide a $21 million
aircraft chamber complex to the Agency for Defense Development of South Korea as
a part of Boeing's F-15K offset program. Although we were notified in June of
our selection, the contract was only recently negotiated and as such, the order
will be reflected in our fourth quarter backlog.
"In Communications, we expanded our presence in the IOU market with the
award received in April 2004 from Bangor Hydro-Electric Company. We also
positioned ourselves for
- more -
Add Six
further differentiation in the AMR market through the acquisition of pre-payment
technology from CIC Global LLC. Over the next 12 months we intend to integrate
the acquired capability into our TWACS offering."
Mr. Richey concluded, "I particularly appreciate both the support and
guidance we received from our Board throughout the formulation and execution of
our repositioning plan. I also greatly appreciate the support and patience of
our shareholders. Having essentially completed the actions we initiated a year
ago, the challenge ahead is to grow the business from what I believe is a strong
foundation. Although timing can be a challenge with new product undertakings,
acquisitions and major new programs, I believe we have both the resources and
opportunities to succeed over the long term."
Fiscal 2004 Business Outlook
- ----------------------------
Statements contained in the preceding and following paragraphs are based on
current expectations. Statements that are not strictly historical are
forward-looking, and actual results may differ materially.
Fourth Quarter Revenue and EBIT
- -------------------------------
Management expects the aggregate revenues for the fourth quarter of fiscal
2004 to be consistent with the third quarter of fiscal 2004. On a segment basis,
the fourth quarter revenue expectations relative to the third quarter of fiscal
2004, are flat for Communications, modestly lower in Filtration due to the
August European holiday plant shutdown, and modestly higher in Test.
The current expectations for the fourth quarter fiscal 2004 EBIT margins by
segment compared to the fiscal 2004 third quarter EBIT margins are flat for
Communications, an
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Add Seven
improvement of 1 to 2 percent in Filtration primarily resulting from further
benefits related to the closure of the Puerto Rico facility, and 1 to 2 percent
lower margins in Test resulting from the sales mix.
Earnings Per Share (GAAP and Operational)
- -----------------------------------------
Management anticipates both GAAP and Operational earnings per share (EPS)
for the fourth quarter of fiscal 2004 will be between $0.81 and $0.86 per share.
The resulting fiscal year 2004 EPS from continuing operations on a GAAP and
Operational basis is expected to be $2.72 to $2.77 per share, and $2.80 to $2.85
per share, respectively.
The previous range of EPS guidance from continuing operations was $2.42 to
$2.52 per share on a GAAP basis, and $2.50 to $2.60 per share on an Operational
basis.
Conference Call
- ---------------
The Company will host a conference call today, August 10, at 9:30 a.m.,
Central Time, to discuss the Company's third quarter operating results. A live
audio web cast 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 today from 12:00 p.m.,
Central Time, until 11:59 p.m., Central Time on August 17, 2004. To access the
replay, dial 1-888-203-1112 and enter the pass code 442881. In addition, a
replay will be available for seven days on the Company's web site noted above.
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Add Eight
Forward-Looking Statements
- --------------------------
Statements in this press release regarding the results and timing of real
estate sales, the level of contributions from each segment, the success and
timing of technology integration efforts, the ability to differentiate the
Company in the AMR markets, future fiscal 2004 revenues, EBIT, EPS and earnings,
long term success of the Company, and 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. 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: weakening of economic conditions in
served markets; changes in customer demands or customer insolvencies;
competition; intellectual property rights; technical difficulties or delays
experienced during technology integration efforts; successful execution of the
planned sale of the Company's Puerto Rico facility; delivery delays or defaults
by customers; termination for convenience of customer contracts; timing and
magnitude of future contract awards; performance issues with key suppliers and
subcontractors; collective bargaining and labor disputes; changes in laws and
regulations including changes in accounting standards and taxation requirements;
changes in foreign or U.S. business conditions affecting the distribution of
foreign earnings; costs relating to environmental matters; litigation
uncertainty; and the Company's successful execution of internal operating plans.
ESCO, headquartered in St. Louis, is a leading supplier of engineered
filtration products to the process, health care and transportation markets
worldwide. In addition, the Company markets proprietary, special purpose
communications systems and is the industry leader in RF shielding and EMC test
products.
(Tables Attached)
Add Nine
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30, 2004
--------------------------------
GAAP Adj. "Operational"(1)
---- ---- ----------------
Net Sales $107,911 107,911
Cost and Expenses:
Cost of sales 70,125 70,125
SG&A 19,670 19,670
Interest income (129) (129)
Other expenses, net 71 71
------ ------ ------
Total costs and expenses 89,737 - 89,737
------ ------ ------
Earnings before income taxes 18,174 - 18,174
Income taxes 6,958 6,958
----- ------ -----
Net earnings from
continuing operations 11,216 - 11,216
Loss from discontinued
operations, net of tax
of $(527) (1,100) 1,100 (2) -
Gain on sale of discontinued
operations, net of tax of
$(1,153) 1,925 (1,925)(2) -
----- ------ ------
Net earnings from
discontinued operations 825 (825) -
------ ------ ------
Net earnings $ 12,041 (825) 11,216
======== ====== ======
Earnings (loss) per share:
Basic
Net earnings from
continuing operations $ 0.87 0.87
Net earnings from
discontinued operations 0.06 0.00
---- ----
Net earnings $ 0.93 0.87
==== ====
Diluted
Net earnings from
continuing operations $ 0.84 0.84
Net earnings from
discontinued operations 0.06 0.00
---- ----
Net earnings $ 0.90 0.84
==== ====
Average common shares O/S:
Basic 12,938 12,938
====== ======
Diluted 13,315 13,315
====== ======
(1) Represents results on an adjusted basis, after removing the item
described below in (2).
(2) Relates to the MicroSep businesses, sold in Q3 of 2004, which
are classified as "discontinued operations."
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Add Ten
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
Dollars in thousands, except per share amounts)
Three Months Ended June 30, 2003
--------------------------------
GAAP Adj. "Operational"(1)
---- ---- ----------------
Net Sales $ 90,794 90,794
Cost and Expenses:
Cost of sales 62,769 62,769
Asset impairment 4,528 (4,528)(2) -
SG&A 17,438 (302)(3) 17,136
Interest expense 175 175
Other expenses, net (1,195) 1,801 (4) 606
------ ----- ---
Total costs and expenses 83,715 (3,029) 80,686
------ ------ ------
Earnings before income taxes 7,079 3,029 10,108
Income taxes 2,628 768 (5) 3,396
----- --- -----
Net earnings from continuing
operations 4,451 2,261 6,712
Loss from discontinued operations,
net of tax of $(580) (1,190) 1,190 (6) -
Gain on sale of discontinued
operations, net of tax of $733 894 (894)(7) -
--- ---- ----
Net loss from discontinued
operations (296) 296 -
---- --- ----
Net earnings $ 4,155 2,557 6,712
======= ===== =====
Earnings (loss) per share:
Basic
Net earnings from continuing
operations 0.35 0.53
Net loss from
discontinued operations (0.02) 0.00
----- ----
Net earnings $ 0.33 0.53
----- ----
Diluted
Net earnings from continuing
operations $ 0.34 0.51
Net loss from discontinued
operations (0.02) 0.00
----- ----
Net earnings 0.32 0.51
==== ====
Average common shares O/S:
Basic 12,717 12,717
====== ======
Diluted 13,153 13,153
====== ======
(1) Represents results on an adjusted basis, after removing the items
described below.
(2) Represents the asset impairment charges related to the Filtertek
Puerto Rico facility/U.K. facility.
(3) Represents severance charges related to the Filtertek Puerto Rico
facility/U.K. facility.
(4) Represents the $2.1 million gain from settlement of patent
litigation partially offset by $0.3 million of exit costs related
to the Filtertek Puerto Rico facility.
(5) Represents the tax impact of the items described above in
(2)-(4).
(6) Relates to the MicroSep and Rantec businesses which are
classified as "discontinued operations."
(7) Relates to the Rantec business, sold in Q3 of 2003, which is
classified as "discontinued operations."
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Add Eleven
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended June 30, 2004
-------------------------------
(1)
GAAP Adj. "Operational"
---- ---- -------------
Net Sales $306,477 306,477
Cost and Expenses:
Cost of sales 207,175 207,175
SG&A 57,549 (470)(2) 57,079
Interest income (648) (648)
Other expenses, net 1,199 (860)(3) 339
----- ---- ---
Total costs and expenses 265,275 (1,330) 263,945
------- ------ -------
Earnings before income taxes 41,202 1,330 42,532
Income taxes 15,833 305 (4) 16,138
------ --- ------
Net earnings from continuing
operations 25,369 1,025 26,394
Loss from discontinued operations,
net of tax of $(1,735) (3,737) 3,737 (5) -
Gain on sale of discontinued
operations, net of tax of $(1,153) 1,925 (1,925)(5) -
----- ------ ------
Net loss from discontinued
operations (1,812) 1,812 -
------ ----- ------
Net earnings $ 23,557 2,837 26,394
======== ===== ======
Earnings (loss) per share:
Basic
Net earnings from continuing
operations $ 1.97 2.05
Net loss from discontinued
operations (0.14) 0.00
----- ----
Net earnings $ 1.83 2.05
==== ====
Diluted
Net earnings from continuing
operations 1.91 1.98
Net loss from discontinued
operations (0.14) 0.00
----- ----
Net earnings 1.77 1.98
==== ====
Average common shares O/S:
Basic 12,885 12,885
====== ======
Diluted 13,310 13,310
====== ======
(1) Represents results on an adjusted basis, after removing the items
described below.
(2) Represents severance charges related to the exit of the Puerto
Rico facility.
(3) Represents shutdown costs related to the exit of the Puerto Rico
facility.
(4) Represents the tax impact of the items described above in (2)-(3).
(5) Relates to the MicroSep businesses, sold in Q3 of 2004, which are
classified as "discontinued operations."
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Add Twelve
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended June 30, 2003
-------------------------------
(1)
GAAP Adj. "Operational"
---- ---- -------------
Net Sales $291,079 291,079
Cost and Expenses:
Cost of sales 198,966 198,966
Asset impairment 4,528 (4,528)(2) -
SG&A 53,829 (1,713)(3) 52,116
Interest income (94) (94)
Other expenses, net 1,621 312 (4) 1,933
----- --- -----
Total costs and expenses 258,850 (5,929) 252,921
------- ------ -------
Earnings before income taxes 32,229 5,929 38,158
Income taxes 11,966 2,106 (5) 14,072
------ ----- ------
Net earnings from continuing
operations 20,263 3,823 24,086
Loss from discontinued operations,
net of tax of $(1,925) (4,819) 4,819 (6) -
Gain on sale of discontinued
operations, net of tax of $733 894 (894)(7) -
---- --- ---- ----
Net loss from discontinued
operations (3,925) 3,925 -
------ ----- ----
Net earnings $ 16,338 7,748 24,086
======== ===== ======
Earnings (loss) per share:
Basic
Net earnings from continuing
operations $ 1.60 1.91
Net loss from discontinued
operations (0.31) 0.00
----- ----
Net earnings $ 1.29 1.91
======== ====
Diluted
Net earnings from continuing
operations $ 1.55 1.84
Net loss from discontinued
operations (0.30) 0.00
----- ----
Net earnings $ 1.25 1.84
======== ====
Average common shares O/S:
Basic 12,634 12,634
====== ======
Diluted 13,085 13,085
====== ======
(1) Represents results on an adjusted basis, after removing the items
described below.
(2) Represents the asset impairment charges related to the Filtertek
Puerto Rico facility/U.K. facility.
(3) Represents $1.4 million of costs related to the MTA and $0.3
million of severance charges related to the exit of the Filtertek
Puerto Rico facility/U.K. facility.
(4) Represents $1.5 million of charges related to the Whatman MSA
dispute, $0.2 million of Puerto Rico exit costs offset by $2.1
million of a gain from settlement of patent litigation.
(5) Represents the tax impact of items (2)-(4) described above.
(6) Relates to the MicroSep and Rantec businesses which are
classified as "discontinued operations."
(7) Relates to the Rantec business, sold in Q3 of 2003, which is
classified as "discontinued operations."
- more -
Add Thirteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Net Sales - GAAP
----------------
Filtration $ 44.0 41.6 126.2 120.6
Communications 37.2 28.5 99.0 105.9
Test 26.7 20.7 81.3 64.6
---- ---- ---- ----
Totals $107.9 90.8 306.5 291.1
====== ==== ===== =====
EBIT - GAAP (1)
----------------
Filtration (2) $ 6.4 2.4 14.1 11.5
Communications 11.7 5.5 26.3 25.7
Test 2.8 1.2 (3) 8.3 4.9 (3)
Corporate (2.9) (1.8) (8.1) (10.0)(4)
---- ---- ---- -----
Totals $ 18.0 7.3 40.6 32.1
====== === ==== ====
Note: Amounts presented above exclude the operations of the MicroSep
businesses, which are classified as "discontinued operations."
Depreciation and amortization expense for continuing
operations was $3.1 million and $2.6 million for the third quarters
ended June 30, 2004 and 2003, respectively, and $9.0 million and
$8.4 million for the nine-month periods ended June 30, 2004 and 2003,
respectively.
(1) EBIT is defined as earnings from continuing operations before
interest and taxes.
(2) The reconciliation to Operational Revenue/EBIT for the Filtration
segment is below:
Q3 FY 04 Q3 FY 03
-------- --------
Net Sales EBIT Net Sales EBIT
--------- ---- --------- ----
Filtration Segment - GAAP $44.0 $ 6.4 $ 41.6 $ 2.4
Adjustments - - - 2.6 (5)
---- --- ---- ---
Filtration Segment -
"Operational" $44.0 $ 6.4 $ 41.6 $ 5.0
===== ===== ====== =====
YTD FY 04 YTD FY 03
--------- ---------
Net Sales EBIT Net Sales EBIT
--------- ---- --------- ----
Filtration Segment - GAAP $126.2 $14.1 $120.6 $11.5
Adjustments - 1.3 (6) - 4.1 (7)
----- ---- ----- ----
Filtration Segment -
"Operational" $126.2 $15.4 $120.6 $15.6
====== ===== ====== =====
(3) Includes $0.3 million of charges related to the U.K. Test move/
restructuring.
(4) Includes $1.4 million of costs related to the MTA between the
Company and its former Chairman.
(5) Includes $4.7 million of impairment charges and exit costs
related to the Filtertek Puerto Rico facility and a $2.1 million
gain related to the settlement of patent litigation.
(6) Includes $1.3 million of exit costs related to the Filtertek
Puerto Rico facility.
(7) Includes $4.7 million of impairment charges and exit costs
related to the Filtertek Puerto Rico facility and a $2.1 million
gain related to the settlement of patent litigation. Also,
includes a $1.5 million charge resulting from an equipment
lease termination related to the Whatman Hemasure MSA dispute.
- more -
Add Fourteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(unaudited)
(Dollars in millions)
EBIT (1) - As Reported
- ----------------------
Three Months Ended Nine Months Ended
June 30, June 30,
-------- --------
2004 2003 2004 2003
---- ---- ---- ----
EBIT $ 18.0 $ 7.3 $ 40.6 $ 32.1
Interest income (expense) 0.1 (0.2) 0.6 0.1
Less: Income taxes 6.9 2.6 15.8 11.9
---- --- ---- ----
Net earnings from
continuing operations $ 11.2 $ 4.5 $ 25.4 $ 20.3
====== ====== ====== ======
(1) EBIT is defined as earnings from continuing operations before
interest and taxes. Excludes the operations of the MicroSep
businesses, which are classified as "discontinued operations."
EPS FY 2004 Reconciliation
- --------------------------
Range
-----
9 mth YTD
Actual Q4 FY 2004
------ -- -------
GAAP outlook -
Continuing Operations $ 1.91 $0.81-0.86 $2.72-2.77
Add: Puerto Rico exit $ 0.08 - 0.08
------ ---------- ----------
Operational outlook (2) $ 1.99 $0.81-0.86 $2.80-2.85
== ====== ========== ==========
(2) Operational EPS is defined as earnings per share less the
"adjustments" defined above.
- more -
Add Fifteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
June 30, September 30,
2004 2003
---- ----
(unaudited)
Assets
Cash and cash equivalents $ 57,544 $ 31,285
Accounts receivable, net 76,922 69,379
Costs and estimated
earnings on long-term
contracts 2,229 4,663
Inventories 46,736 48,432
Current portion of deferred
tax assets 24,962 24,187
Other current assets 4,459 6,549
Current assets from
discontinued operations (1) - 21,640
------- -------
Total current assets 212,852 206,135
Property, plant and equipment,
net 71,912 71,169
Goodwill 69,002 68,653
Deferred tax assets 16,497 16,618
Other assets 18,691 14,081
Other assets from discontinued
operations (1) - 16,725
------- -------
$388,954 $393,381
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Short-term borrowings and
current maturities of long-
term debt $ 37 $ 10,143
Other current liabilities 61,352 66,097
Current liabilities from
discontinued operations (1) - 9,397
------ ------
Total current liabilities 61,389 85,637
Deferred income 2,852 3,194
Other liabilities 21,227 20,556
Long-term debt 509 490
Liabilities from discontinued
operations (1) - 8,115
Shareholders' equity 302,977 275,389
------- -------
$388,954 $393,381
======== ========
(1) Relates to the MicroSep businesses, sold in Q3 of 2004, which are
classified as "discontinued operations."
- more -
Add Sixteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Nine Months
Ended Ended
June 30, 2004 June 30, 2003
------------- -------------
Cash flows from operating activities:
Net earnings 23,557 16,338
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Net loss from discontinued operations,
net of tax 1,812 3,925
Depreciation and amortization 8,980 8,446
Changes in operating working capital (6,843) (9,294)
Effect of deferred taxes 121 4,507
Proceeds from settlement of patent
litigation - 7,300
Gain on settlement of patent litigation - (2,056)
Other 3,163 4,444
----- -----
Net cash provided by operating
activities - continuing operations 30,790 33,610
Net cash used by discontinued
operations (1) (2,735) (4,708)
------ ------
Net cash provided by operating
activities 28,055 28,902
------ ------
Cash flows from investing activities:
Acquisition of businesses -
continuing operations (238) (4,000)
Acquisition of businesses -
discontinued operations - (1,364)
Proceeds from divestiture of businesses 23,275 6,000
Proceeds from note receivable 2,120 -
Capital expenditures - continuing
operations (7,905) (7,173)
Capital expenditures - discontinued
operations (1,390) (2,542)
------ ------
Net cash provided (used) by investing
activities 15,862 (9,079)
------ ------
Cash flows from financing activities:
Proceeds from long-term debt 378 -
Net decrease in short-term borrowings (10,000) (86)
Principal payments on long-term debt -
continuing operations (478) (626)
Principal payments on long-term debt -
discontinued operations (1) (9,024) -
Purchases of common stock into treasury - (1,438)
Other 1,466 2,789
----- -----
Net cash (used) provided by financing
activities (17,658) 639
------- ---
Net increase in cash and cash equivalents 26,259 20,462
Cash and cash equivalents, beginning of
period 31,285 24,930
------ ------
Cash and cash equivalents, end of period 57,544 45,392
====== ======
(1) Relates to the MicroSep businesses which are classified as
"discontinued operations."
- more -
Add Seventeen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Free Cash Flow - YTD FY 2004-June 30, 2004
(Dollars in thousands)
Continuing Discontinued
Operations Operations Total
---------- ---------- -----
Net cash provided by operating
activities $ 30,790 (2,735) 28,055
Less: Capital expenditures (7,905) (1,390) (9,295)
------ ------ ------
Free cash flow $ 22,885 (4,125) 18,760
========= ====== ======
- more -
Add Eighteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered
-------------------
Orders - Q3 FY 2004 (1) Filtration Comm. Test Total
------------------------ ---------- ----- ---- -----
Beginning Backlog - 3/31/04 $ 90,385 126,124 42,985 259,494
Entered Orders 40,261 31,773 * 24,570 96,604
Sales (44,034) (37,190)*(26,687) (107,911)
------- ------- ------- --------
Ending Backlog - 6/30/04 $ 86,612 120,707 40,868 248,187
========= ======= ====== =======
Backlog And Entered
-------------------
Orders - YTD FY 2004 (1) Filtration Comm. Test Total
------------------------- ---------- ----- ---- -----
Beginning Backlog - 9/30/03 86,194 130,434 46,342 262,970
Entered Orders 126,579 89,236 * 75,879 291,694
Sales (126,161) (98,963)*(81,353) (306,477)
-------- ------- ------- --------
Ending Backlog - 6/30/04 86,612 120,707 40,868 248,187
====== ======= ====== =======
(1) Excludes the MicroSep businesses for the period presented.
* Communications Recap:
-----------------------
Q3 YTD
FY 2004 Q3 FY 2004 YTD
Entered FY 2004 Entered FY 2004
Orders Sales Orders Sales
------ ----- ------ -----
AMR Products (DCSI) 30,798 36,215 87,376 97,103
SecurVision Video Security
(Comtrak) 975 975 1,860 1,860
------ --- ----- -----
Total 31,773 37,190 89,236 98,963
------ ------ ------ ------
Orders/Sales to PPL - (642) - (20,555)
------ ---- ------ -------
Excluding PPL 31,773 36,548 89,236 78,408
====== ====== ====== ======
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