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Document And Entity Information - shares	6 Months Ended
Document And Entity Information - shares	Mar. 31, 2020	Apr. 30, 2020
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	1-10596
Entity Registrant Name	ESCO TECHNOLOGIES INC.
Entity Incorporation, State or Country Code	MO
Entity Tax Identification Number	43-1554045
Entity Address, Address Line One	9900A CLAYTON ROAD
Entity Address, City or Town	ST. LOUIS
Entity Address, State or Province	MO
Entity Address, Postal Zip Code	63124-1186
City Area Code	(314)
Local Phone Number	213-7200
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	ESE
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		26,037,248
Entity Central Index Key	0000866706
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 180,492	$ 171,243	$ 352,220	$ 334,608
Costs and expenses:
Cost of sales	113,242	103,547	219,969	206,001
Selling, general and administrative expenses	39,982	39,327	82,087	77,867
Amortization of intangible assets	5,220	4,371	11,030	8,771
Interest expense, net	1,320	1,853	3,741	3,708
Other expenses (income), net	703	2,022	998	(5,357)
Total costs and expenses	160,467	151,120	317,825	290,990
Earnings before income taxes	20,025	20,123	34,395	43,618
Income tax expense	2,203	2,301	5,809	8,446
Earnings from continuing operations	17,822	17,822	28,586	35,172
Earnings from discontinued operations, net of tax expense of $257		975	(601)	942
Gain on sale of discontinued operations			76,614
Earnings from discontinued operations		975	76,013	942
Net earnings	$ 17,822	$ 18,797	$ 104,599	$ 36,114
Earnings per share:
Basic - Continuing operations	$ 0.69	$ 0.69	$ 1.10	$ 1.36
Basic - Discontinued operations	0.00	0.04	2.93	0.04
Basic - Net earnings	0.69	0.73	4.03	1.40
Diluted - Continuing operations	0.68	0.68	1.09	1.34
Diluted - Discontinued operations	0.00	0.04	2.91	0.04
Diluted - Net earnings	$ 0.68	$ 0.72	$ 4.00	$ 1.38

CONSOLIDATED STATEMENTS OF OPERATIONS (Paranthetical) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF OPERATIONS
(Loss) earnings from discontinued operations, net of tax expense	$ 257	$ 269	$ 52
Gain on sale of discontinued operations, tax expense		$ 23,734

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings	$ 17,822	$ 18,797	$ 104,599	$ 36,114
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(6,885)	677	(2,962)	(3,852)
Net unrealized gain on derivative instruments		126		100
Total other comprehensive income (loss), net of tax	(6,885)	803	(2,962)	(3,752)
Comprehensive income	$ 10,937	$ 19,600	$ 101,637	$ 32,362

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Sep. 30, 2019
Current assets:
Cash and cash equivalents	$ 100,195	$ 61,808
Accounts receivable, net	157,050	158,715
Contract assets	96,100	110,211
Inventories, net	141,027	124,956
Other current assets	17,228	14,190
Assets of discontinued operations - current		25,314
Total current assets	511,600	495,194
Property, plant and equipment, net of accumulated depreciation of $122,204 and $113,520, respectively	139,248	127,843
Intangible assets, net of accumulated amortization of $118,277 and $107,247, respectively	371,779	381,605
Goodwill	389,630	390,256
Operating lease assets	18,901
Other assets	10,421	4,445
Assets of discontinued operations - other		67,377
Total assets	1,441,579	1,466,720
Current liabilities:
Current maturities of long-term debt	20,000	20,000
Accounts payable	53,617	63,800
Contract liabilities	95,382	81,177
Accrued salaries	27,062	37,194
Accrued other expenses	54,968	37,947
Liabilities of discontinued operations - current		11,517
Total current liabilities	251,029	251,635
Pension obligations	22,861	22,682
Deferred tax liabilities	61,690	60,856
Non-current operating lease liabilities	15,010
Other liabilities	34,782	36,326
Long-term debt	130,000	265,000
Liabilities of discontinued operations - other		3,999
Total liabilities	515,372	640,498
Shareholders' equity:
Preferred stock, par value $.01 per share, authorized 10,000,000 shares
Common stock, par value $.01 per share, authorized 50,000,000 shares, issued 30,596,940 and	306	306
Additional paid-in capital	294,787	292,408
Retained earnings	785,184	684,741
Accumulated other comprehensive loss, net of tax	(46,936)	(43,974)
Total stockholders' equity before treasury stock	1,033,341	933,481
Less treasury stock, at cost: 4,607,911 and 4,615,627 common shares, respectively	(107,134)	(107,259)
Total shareholders' equity	926,207	826,222
Total liabilities and shareholders' equity	$ 1,441,579	$ 1,466,720

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Sep. 30, 2019
CONSOLIDATED BALANCE SHEETS
Accumulated depreciation	$ 122,204	$ 113,520
Accumulated amortization	$ 118,277	$ 107,247
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000,000	50,000,000
Common stock, shares issued	30,596,940	30,596,940
Treasury stock, shares	4,607,911	4,615,627

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net earnings	$ 104,599	$ 36,114
Earnings from discontinued operations	(76,013)	(942)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	20,583	16,837
Stock compensation expense	2,896	2,557
Changes in assets and liabilities	(16,247)	(28,124)
Change in property, plant and equipment due to gain on sale of building		(8,922)
Pension contributions		(833)
Effect of deferred taxes	834	(1,431)
Net cash provided by operating activities - continuing operations	36,652	15,256
Net cash (used) provided by operating activities - discontinued operations	(14,622)	1,736
Net cash provided by operating activities	22,030	16,992
Cash flows from investing activities:
Proceeds from sale of building and land		17,201
Additions to capitalized software	(4,280)	(4,494)
Capital expenditures	(21,211)	(10,127)
Net cash (used) provided by investing activities - continuing operations	(25,491)	2,580
Proceeds from sale of discontinued operations	183,997
Capital expenditures - discontinued operations	(1,728)	(7,298)
Net cash provided (used) by investing activities - discontinued operations	182,269	(7,298)
Net cash provided (used) by investing activities	156,778	(4,718)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings	10,000	23,000
Principal payments on long-term debt	(145,000)	(26,000)
Dividends paid	(4,156)	(4,146)
Other		370
Net cash used by financing activities - continuing operations	(139,156)	(6,776)
Net cash (used) provided by financing activities - discontinued operations	(2,140)	1,091
Net cash (used) by financing activities	(141,296)	(5,685)
Effect of exchange rate changes on cash and cash equivalents	875	(2,111)
Net increase in cash and cash equivalents	38,387	4,478
Cash and cash equivalents, beginning of period	61,808	30,477
Cash and cash equivalents, end of period	100,195	34,955
Supplemental cash flow information:
Interest paid	3,477	3,594
Income taxes paid (including state and foreign)	$ 23,098	$ 13,450

BASIS OF PRESENTATION

6 Months Ended

Mar. 31, 2020

BASIS OF PRESENTATION

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods presented. The consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required for annual financial statements by accounting principles generally accepted in the United States of America (GAAP). For further information, refer to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Certain 2019 amounts have been reclassified to conform with the 2020 presentation.

The Company’s results for the three-month period ended March 31, 2020 are not necessarily indicative of the results for the entire 2020 fiscal year. References to the second quarters of 2020 and 2019 represent the fiscal quarters ended March 31, 2020 and 2019, respectively. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates.

Beginning in the first quarter of 2020, Management has renamed the Filtration / Fluid Flow (Filtration) segment as Aerospace & Defense (A&D) to better reflect the composition of the segment’s products, end markets and customer characteristics. The A&D’s segment’s individual legal and operating entities, historical financial results, and management structure are unchanged from what was formerly presented as Filtration.

TECHNICAL PACKAGING DIVESTITURE

6 Months Ended

Mar. 31, 2020

TECHNICAL PACKAGING DIVESTITURE

TECHNICAL PACKAGING DIVESTITURE

2. TECHNICAL PACKAGING DIVESTITURE

On December 31, 2019, the Company completed the sale of its Technical Packaging business segment, consisting of the Company's wholly-owned subsidiaries Thermoform Engineered Quality LLC, Plastique Ltd. and Plastique sp. z o.o. (the "Technical Packaging Business"), to Sonoco Plastics, Inc. and Sonoco Holdings, Inc. ("Buyers"), two wholly-owned subsidiaries of Sonoco Products Company, pursuant to the Equity Purchase Agreement entered into on November 15, 2019. The companies within this segment provide innovative solutions to the medical and commercial markets for thermoformed packages and specialty products using a wide variety of thin gauge plastics and pulp. Results of operations, financial position and cash flows for the Technical Packaging business is reflected as discontinued operations in the consolidated financial statements and related notes for all periods presented.

Net sales from the Technical Packaging business were zero and $16.5 million in the second quarter and first six months of 2020, respectively, compared to $22.7 million and $41.9 million in the corresponding periods of 2019. The Company received net proceeds from the sale of approximately $184 million and recorded a $76.6 million after-tax gain on the sale in the first quarter of 2020. The Company expects to finalize the working capital adjustment during the third quarter of 2020.

The major classes of assets and liabilities of the Technical Packaging business included in the Consolidated Balance Sheet at September 30, 2019 are shown below (in millions).


	September 30, 2019
Assets:
Accounts receivable, net	$	15.7
Contract assets, net		5.1
Inventories		3.9
Other current assets		0.6
Current assets		25.3
Property, plant & equipment, net		33.6
Intangible assets, net		11.4
Goodwill		19.0
Other assets		3.4
Total assets	$	92.7
Liabilities:
Accounts payable	$	7.6
Accrued expenses and other current liabilities		3.9
Current liabilities		11.5
Other liabilities		4.0
Total liabilities	$	15.5

ACCOUNTING STANDARDS UPDATE

6 Months Ended

Mar. 31, 2020

ACCOUNTING STANDARDS UPDATE

ACCOUNTING STANDARDS UPDATE

3. ACCOUNTING STANDARDS UPDATE

In February 2016, the FASB issued ASU No. 2016-062, "Leases" (ASU 2016-062) which supersedes ASC 840, "Leases" and creates a new topic, ASC 842, "Leases." Subsequent to the issuance of ASU 2016-062, ASC 842 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update. Effective October 1, 2019, the Company adopted these updates using the optional transition method. These updates require lessees to recognize a lease liability and a lease asset for all leases, including operating leases, with a term greater than 12 months on its balance sheet. Upon initial application, the provisions of these updates are required to be applied using the modified retrospective method, which requires retrospective adoption to each prior reporting period presented with the cumulative effect of adoption recorded to the earliest reporting period presented. An optional transition method can be utilized which requires retrospective adoption beginning on the date of adoption with the cumulative effect of initially applying these updates recognized at the date of initial adoption. The standard also provided several optional practical expedients for use in transition. The Company elected to use what the FASB has deemed the “package of practical expedients,” which allowed the Company not to reassess previous conclusions regarding lease identification, lease classification and the accounting treatment for initial direct costs. These updates also expand the required quantitative and qualitative disclosures surrounding leases. The adoption resulted in the addition of "right of use" assets and lease liabilities of approximately $20 million in the consolidated balance sheet, with no significant change to the Company’s consolidated statements of operations or cash flows. Refer to Note 16 for further discussion.

EARNINGS PER SHARE (EPS)

6 Months Ended

Mar. 31, 2020

EARNINGS PER SHARE (EPS)

EARNINGS PER SHARE (EPS)

4. EARNINGS PER SHARE (EPS)

Basic EPS is calculated using the weighted average number of common shares outstanding during the period. Diluted EPS is calculated using the weighted average number of common shares outstanding during the period plus shares issuable upon the assumed exercise of dilutive common share options and vesting of performance-accelerated restricted shares (restricted shares) by using the treasury stock method. The number of shares used in the calculation of earnings per share for each period presented is as follows (in thousands):


	Three Months		Six Months
	Ended March 31,		Ended March 31,
	2020	2019	2020	2019

Weighted Average Shares Outstanding - Basic	25,988	25,918	25,985	25,915
Dilutive Options and Restricted Shares	100	118	141	163
Adjusted Shares - Diluted	26,088	26,036	26,126	26,078

SHARE-BASED COMPENSATION

6 Months Ended

Mar. 31, 2020

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

5. SHARE-BASED COMPENSATION

The Company provides compensation benefits to certain key employees under several share-based plans providing for performance-accelerated restricted shares (restricted shares), and to non-employee directors under a non-employee directors compensation plan.

Performance-Accelerated Restricted Share Awards

Compensation expense related to the restricted share awards was $1.1 million and $2.3 million for the three and six-month periods ended March 31, 2020, respectively, and $0.9 million and $2.0 million for the corresponding periods in 2019. There were 175,577 non-vested shares outstanding as of March 31, 2020.

Non-Employee Directors Plan

Compensation expense related to the non-employee director grants was $0.3 million and $0.6 million for the three and six-month periods ended March 31, 2020, respectively, and $0.3 million and $0.5 million for the corresponding periods in 2019.

The total share-based compensation cost that has been recognized in the results of operations and included within selling, general and administrative expenses (SG&A) was $1.5 million and $2.9 million for the three and six-month periods ended March 31, 2020, respectively, and $1.2 million and $2.6 million for the corresponding periods in 2019. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $0.3 million and $0.7 million for the three and six-month periods ended March 31, 2020, respectively, and $0.3 million and $0.6 million for the corresponding periods in 2019. As of March 31, 2020, there was $6.8 million of total unrecognized compensation cost related to share-based compensation arrangements. That cost is expected to be recognized over a remaining weighted-average period of 2.1 years.

INVENTORIES

6 Months Ended

Mar. 31, 2020

INVENTORIES

INVENTORIES

6. INVENTORIES

Inventories, net, from continuing operations consist of the following:


	March 31,		September 30,
(In thousands)	2020		2019

Finished goods	$	23,898		23,550
Work in process		39,768		26,407
Raw materials		77,361		74,999
Total inventories	$	141,027		124,956

GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Mar. 31, 2020

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Included on the Company’s Consolidated Balance Sheets at March 31, 2020 and September 30, 2019 are the following intangible assets gross carrying amounts and accumulated amortization from continuing operations:


	March 31,		September 30,
(Dollars in thousands)	2020		2019
Goodwill	$	389,630		390,256

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,067		1,945
Less: accumulated amortization		806		748
Net	$	1,261		1,197

Capitalized software
Gross carrying amount	$	83,243		78,962
Less: accumulated amortization		53,034		48,530
Net	$	30,209		30,432

Customer relationships
Gross carrying amount	$	226,946		227,225
Less: accumulated amortization		61,486		55,326
Net	$	165,460		171,899

Other
Gross carrying amount	$	5,081		5,441
Less: accumulated amortization		2,953		2,645
Net	$	2,128		2,796
Intangible assets with indefinite lives:
Trade names	$	172,721		175,281

The changes in the carrying amount of goodwill attributable to each business segment for the six months ended March 31, 2020 is as follows on a continuing operations basis:


					Aerospace
(Dollars in millions)	USG		Test		& Defense		Total
Balance as of September 30, 2019		254.0		34.1		102.2		390.3
Foreign currency translation		(0.6)		(0.1)		—		(0.7)
Balance as of March 31, 2020	$	253.4		34.0		102.2		389.6

BUSINESS SEGMENT INFORMATION

6 Months Ended

Mar. 31, 2020

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

8. BUSINESS SEGMENT INFORMATION

The Company is organized based on the products and services that it offers, and classifies its continuing business operations in three reportable segments for financial reporting purposes: Aerospace & Defense (formerly called Filtration/Fluid Flow), RF Shielding and Test (Test), and Utility Solutions Group (USG). The Aerospace & Defense segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Westland Technologies Inc. (Westland), Mayday Manufacturing Co. and its affiliate Hi-Tech Metals, Inc. (collectively referred to as Mayday) and Globe Composite Solutions, LLC (Globe). The companies within this segment primarily design and manufacture specialty filtration and naval products, including hydraulic filter elements and fluid control devices used in commercial aerospace applications; unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned aircraft and submarines; products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S. Navy maritime survivability; precision-tolerance machined components for the aerospace and defense industry; and metal processing services. The Test segment’s operations consist primarily of ETS-Lindgren Inc. (ETS-Lindgren). ETS-Lindgren is an industry leader in providing its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy. ETS-Lindgren also manufactures radio frequency shielding products and components used by manufacturers of medical equipment, communications systems, electronic products, and shielded rooms for high-security data processing and secure communication. The USG segment’s operations consist primarily of Doble Engineering Company (Doble), Morgan Schaffer Inc. (Morgan Schaffer), and NRG Systems, Inc. (NRG). Doble provides high-end, intelligent, diagnostic test and data management solutions for the electric power delivery industry and is a leading supplier of partial discharge testing instruments used to assess the integrity of high voltage power delivery equipment. Morgan Schaffer provides an integrated offering of dissolved gas analysis, oil testing, and data management solutions for the electric power industry. NRG designs and manufactures decision support tools for the renewable energy industry, primarily wind.

Management evaluates and measures the performance of its reportable segments based on “Net Sales” and “EBIT”, which are detailed in the table below. EBIT is defined as earnings from continuing operations before interest and taxes. The table below is presented on the basis of continuing operations and excludes discontinued operations.


	Three Months				Six Months
	Ended March 31,				Ended September 30,
(In thousands)	2020		2019		2020	2019
NET SALES
Aerospace & Defense	$	95,124		79,478	172,635	145,702
Test		41,600		42,875	82,983	84,161
USG		43,768		48,890	96,602	104,745
Consolidated totals	$	180,492		171,243	352,220	334,608

EBIT
Aerospace & Defense	$	21,736		17,443	34,249	28,053
Test		5,651		5,554	10,307	8,864
USG		4,866		8,767	14,153	30,313
Corporate (loss)		(10,908)		(9,788)	(20,573)	(19,904)
Consolidated EBIT		21,345		21,976	38,136	47,326
Less: Interest expense		(1,320)		(1,853)	(3,741)	(3,708)
Earnings before income taxes	$	20,025		20,123	34,395	43,618

Non-GAAP Financial Measures

The financial measure “EBIT” is presented in the above table and elsewhere in this Report. EBIT on a consolidated basis is a non-GAAP financial measure. Management believes that EBIT is useful in assessing the operational profitability of the Company’s business segments because it excludes interest and taxes, which are generally accounted for across the entire Company on a consolidated basis. EBIT is also one of the measures used by management in determining resource allocations within the Company as well as incentive compensation. A reconciliation of EBIT to net earnings from continuing operations is set forth in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – EBIT.

The Company believes that the presentation of EBIT provides important supplemental information to investors to facilitate comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. However, the Company’s non-GAAP financial measures may not be comparable to other companies’ non-GAAP financial performance measures. Furthermore, the use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

DEBT

6 Months Ended

Mar. 31, 2020

DEBT

DEBT

9. DEBT

The Company’s debt is summarized as follows:


	March 31,		September 30,
(In thousands)	2020		2019
Total borrowings	$	150,000		285,000
Current portion of long-term debt		(20,000)		(20,000)
Total long-term debt, less current portion	$	130,000		265,000

On September 27, 2019, the Company entered into a new five-year credit facility (“the Credit Facility”), modifying its previous credit facility which would have matured December 21, 2020. The Credit Facility includes a $500 million revolving line of credit as well as provisions allowing for the increase of the credit facility commitment amount by an additional $250 million, if necessary, with the consent of the lenders. The bank syndication supporting the facility is comprised of a diverse group of eight banks led by JP Morgan Chase Bank, N.A., as Administrative Agent. The Credit Facility matures September 27, 2024.

At March 31, 2020, the Company had approximately $341 million available to borrow under the Credit Facility, plus the $250 million increase option, subject to lender approval, in addition to $100.2 million cash on hand. The Company classified $20.0 million as the current portion of long-term debt as of March 31, 2020, as the Company intends to repay this amount within the next twelve months; however, the Company has no contractual obligation to repay such amount during the next twelve months. The letters of credit issued and outstanding under the Credit Facility totaled $9.8 million at March 31, 2020.

Interest on borrowings under the Credit Facility is calculated at a spread over either the London Interbank Offered Rate (LIBOR ), the New York Federal Reserve Bank Rate or the prime rate, depending on various factors. The Credit Facility also requires a facility fee ranging from 10 to 25 basis points per annum on the unused portion. The Credit Facility is secured by the unlimited guaranty of the Company’s direct and indirect material U.S. subsidiaries and the pledge of 100% of the equity interests of its direct and indirect material foreign subsidiaries. The financial covenants of the Credit Facility include a leverage ratio and an interest coverage ratio. The weighted average interest rates were 3.24% and 3.21% for the three and six-month periods ending March 31, 2020, respectively , and 3.20% and 3.23% for the three and six-month periods ending March 31, 2019. As of March 31, 2020, the Company was in compliance with all covenants.

INCOME TAX EXPENSE

6 Months Ended

Mar. 31, 2020

INCOME TAX EXPENSE

INCOME TAX EXPENSE

10. INCOME TAX EXPENSE

The second quarter 2020 effective income tax rate from continuing operations was 11.0% compared to 11.4% in the second quarter of 2019. The effective income tax rate in the first six months of 2020 was 16.9% compared to 19.4% for the first six months of 2019. The income tax expense in the second quarter of 2020 was favorably impacted by the release of a valuation allowance of $2.8 million for foreign net operating losses decreasing the second quarter and year-to-date effective tax rate by 14.3% and 8.2%, respectively. The income tax expense in the second quarter and first six months of 2019 was favorably impacted by tax planning strategies to increase the foreign tax credits claimed retrospectively. The Company reduced the valuation allowance for excess foreign tax credits by $2.3 million and recorded an amended return receivable of $0.2 million, which favorably impacted the 2019 second quarter and year-to-date effective tax rate by 12.9% and 5.9%, respectively.

SHAREHOLDERS' EQUITY

6 Months Ended

Mar. 31, 2020

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

11. SHAREHOLDERS’ EQUITY

The change in shareholders’ equity for the first three and six months of 2020 and 2019 is shown below (in thousands):


	Three Months Ended March 31,		Six Months Ended March 31,
	2020	2019	2020	2019

Common stock
Beginning balance	306	305	306	305
Stock plans	—	—	—	—
Ending balance	306	305	306	305

Additional paid-in-capital
Beginning balance	293,056	292,293	292,408	291,190
Stock plans	1,731	1,319	2,379	2,422
Ending balance	294,787	293,612	294,787	293,612

Retained earnings
Beginning balance	769,439	627,670	684,741	606,837
Net earnings common stockholders	17,822	18,797	104,599	36,114
Dividends paid	(2,077)	(2,074)	(4,156)	(4,147)
Adoption of accounting standards updates	—	(1,375)	—	4,214
Ending balance	785,184	643,018	785,184	643,018

Accumulated other comprehensive income (loss)
Beginning balance	(40,051)	(36,083)	(43,974)	(31,528)
Foreign currency translation	(6,885)	677	(2,962)	(3,853)
Pension	—	—	—	—
Forward exchange contracts	—	126	—	101
Ending balance	(46,936)	(35,280)	(46,936)	(35,280)

Treasury stock
Beginning balance	(107,259)	(107,394)	(107,259)	(107,394)
Issued under stock plans	125	135	125	135
Ending balance	(107,134)	(107,259)	(107,134)	(107,259)

Total equity	926,207	794,396	926,207	794,396

RETIREMENT PLANS

6 Months Ended

Mar. 31, 2020

RETIREMENT PLANS

RETIREMENT PLANS

12. RETIREMENT PLANS

A summary of net periodic benefit expense for the Company’s defined benefit plans for the three and six-month periods ended March 31, 2020 and 2019 is shown in the following table. Net periodic benefit cost for each period presented is comprised of the following:


	Three Months				Six Months
	Ended March 31,				Ended March 31,
(In thousands)	2020		2019		2020	2019
Defined benefit plans
Interest cost	$	824		875	1,648	1,750
Expected return on assets		(1,041)		(1,086)	(2,082)	(2,172)
Amortization of:
Prior service cost		—		—	—	—
Actuarial loss		543		487	1,087	974
Net periodic benefit cost	$	326		276	653	552

DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Mar. 31, 2020

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

13. DERIVATIVE FINANCIAL INSTRUMENTS

Market risks relating to the Company’s operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks. In 2018, the Company entered into three interest rate swaps with a notional amount of $150 million to hedge some of its exposure to variability in future LIBOR-based interest payments on variable rate debt, of which one swap is outstanding as of March 31, 2020. In addition, the Company’s Canadian subsidiary Morgan Schaffer enters into foreign exchange contracts to manage foreign currency risk as a portion of their revenue is denominated in U.S. dollars. The Company expects hedging gains or losses to be essentially offset by losses or gains on the related underlying exposures. The amounts ultimately recognized may differ for open positions, which remain subject to ongoing market price fluctuations until settlement. All derivative instruments are reported in either accrued expenses or other assets on the balance sheet at fair value. For derivative instruments designated as cash flow hedges, the gain or loss on the derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item. The interest rate swaps entered into during 2018 were not designated as cash flow hedges and, therefore, the gain or loss on the derivative is reflected in earnings each period.

The following is a summary of the notional transaction amounts and fair values for the Company’s outstanding derivative financial instruments by risk category and instrument type as of March 31, 2020:


		Fair
	Notional	Value		Fix
(In thousands)	amount	(US$)		Rate
Forward contracts	6,250	USD	(381)
Interest rate swap	150,000	USD	(1,997)	2.24	%

FAIR VALUE MEASUREMENTS

6 Months Ended

Mar. 31, 2020

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

14. FAIR VALUE MEASUREMENTS

The accounting guidance establishes a three-level hierarchy for disclosure of fair value measurements, based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date, as follows:

●

Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial Assets and Liabilities

The Company has estimated the fair value of its financial instruments as of March 31, 2020 and September 30, 2019 using available market information or other appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, receivables, inventories, payables, debt and other current assets and liabilities approximate fair value because of the short maturity of those instruments.

Fair Value of Financial Instruments

The Company’s forward contracts and interest rate swaps are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, as presented below as of March 31, 2020:


(In thousands)	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Forward contracts and interest rate swaps	$	—		(2,378)	$	—		(2,378)

Valuation was based on third party evidence of similarly priced derivative instruments.

Nonfinancial Assets and Liabilities

The Company’s nonfinancial assets such as property, plant and equipment, and other intangible assets are not measured at fair value on a recurring basis; however they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. No impairments were recorded during the three and six-month periods ended March 31, 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

REVENUES

6 Months Ended

Mar. 31, 2020

REVENUES

REVENUES

15. REVENUES

Disaggregation of Revenues

Revenues by customer type, geographic location, and revenue recognition method for the three and six-month periods ended March 31, 2020 are presented in the tables below as the Company deems it best depicts how the nature, amount, timing and uncertainty of net sales and cash flows are affected by economic factors. The table below also include a reconciliation of the disaggregated revenue within each reportable segment on a continuing operations basis.


Three months ended March 31, 2020	Aerospace
(In thousands)	& Defense		Test		USG		Total
Customer type:
Commercial	$	51,550	$	33,952	$	43,736	$	129,238
U.S. Government		43,574		7,648		32		51,254
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492

Geographic location:
United States	$	81,458	$	25,121	$	28,706	$	135,285
International		13,666		16,479		15,062		45,207
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492

Revenue recognition method:
Point in time	$	46,610	$	8,009	$	32,209	$	86,828
Over time		48,514		33,591		11,559		93,664
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492


Six months ended March 31, 2020	Aerospace
(In thousands)	& Defense		Test		USG		Total
Customer type:
Commercial	$	93,417	$	69,194	$	95,971	$	258,582
U.S. Government		79,218		13,789		631		93,638
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

Geographic location:
United States	$	146,164	$	49,959	$	63,665	$	259,788
International		26,471		33,024		32,937		92,432
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

Revenue recognition method:
Point in time	$	82,897	$	17,019	$	72,524	$	172,440
Over time		89,738		65,964		24,078		179,780
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

Remaining Performance Obligations

Remaining performance obligations, which is the equivalent of backlog, represent the expected transaction price allocated to contracts that the Company expects to recognize as revenue in future periods when the Company performs under the contracts. These remaining obligations include amounts that have been formally appropriated under contracts with the U.S. Government, and exclude unexercised contract options and potential orders under ordering-type contracts such as Indefinite Delivery, Indefinite Quantity contracts. At March 31, 2020, the Company had $565 million in remaining performance obligations of which the Company expects to recognize revenues of approximately 68% in the next twelve months.

Contract assets and liabilities

Assets and liabilities related to contracts with customers are reported on a contract-by-contract basis at the end of each reporting period. At March 31, 2020, contract assets and liabilities totaled $96.1 million and $95.4 million, respectively. During the first six months of 2020, the Company recognized approximately $36.4 million in revenues that were included in the contract liabilities balance at the adoption date.

LEASES

6 Months Ended

Mar. 31, 2020

LEASES

LEASES

16. LEASES

As described in Note 3, effective October 1, 2019, the Company adopted ASC 842, Leases. The Company determines at lease inception whether an arrangement that provides control over the use of an asset is a lease. The Company recognizes at lease commencement a right-of-use (ROU) asset and lease liability based on the present value of the future lease payments over the lease term. The Company has elected not to recognize a ROU asset and lease liability for leases with terms of 12 months or less. Certain of the Company’s leases include options to extend the term of the lease for up to 20 years. When it is reasonably certain that the Company will exercise the option, Management includes the impact of the option in the lease term for purposes of determining total future lease payments. As most of the Company’s lease agreements do not explicitly state the discount rate implicit in the lease, Management uses the Company’s incremental borrowing rate on the commencement date to calculate the present value of future payments based on the tenor of each arrangement.

The Company’s leases for real estate commonly include escalating payments. These variable lease payments are included in the calculation of the ROU asset and lease liability. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease.

In addition to the base rent, real estate leases typically contain provisions for common-area maintenance and other similar services, which are considered non-lease components for accounting purposes. Non-lease components are excluded from our ROU assets and lease liabilities and expensed as incurred.

The Company’s leases are for office space, manufacturing facilities, and machinery and equipment.

The components of lease costs are shown below:


	Three Months		Six Months
	Ended		Ended
	March 31,		March 31,
(Dollars in thousands)	2020		2020
Finance lease cost
Amortization of right-of-use assets	$	622	$	1,245
Interest on lease liabilities		323		651
Operating lease cost		1,402		2,750
Total lease costs	$	2,347	$	4,646

Additional information related to leases are shown below:


	Three Months		Six Months
	Ended		Ended
	March 31,		September 30,
(Dollars in thousands)	2020		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,380	$	2,717
Operating cash flows from finance leases		198		335
Financing cash flows from finance leases		376		727
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	1,566	$	22,268
Weighted-average remaining lease term
Operating leases				6.37	years
Finance leases				12.97	years
Weighted-average discount rate
Operating leases				3.14	%
Finance leases				4.29	%

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on our Consolidated Balance Sheet on March 31, 2020:


(Dollars in thousands)		Operating	Finance
Years Ending September 30:	Leases		Leases
2020 (excluding the six months ended March 31, 2020)	$	2,667		1,455
2021		4,696		2,930
2022		4,036		3,011
2023		3,090		3,094
2024 and thereafter		6,931		31,481
Total minimum lease payments		21,420		41,971
Less: amounts representing interest		2,202		10,821
Present value of net minimum lease payments	$	19,218		31,150
Less: current portion of lease obligations		4,208		1,902
Non-current portion of lease obligations		15,010		29,248
ROU assets	$	18,901		28,072

Operating lease liabilities are included in the Consolidated Balance Sheet in accrued other expenses and operating lease liabilities. Finance lease liabilities are included in accrued other expenses and other liabilities. Operating lease ROU assets are included as a caption on the Consolidated Balance Sheet and finance lease ROU assets are included in Property, plant and equipment on the Consolidated Balance sheets.

As the Company has not restated prior-year information for the adoption of ASC 842, the following presents the Company’s future minimum lease payments for operating and capital leases under ASC 840 for continuing operations as of September 30, 2019:


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2020	$	5,574		2,518
2021		4,558		2,930
2022		3,950		3,012
2023		3,270		3,094
2024 and thereafter		8,443		31,499
Total minimum lease payments	$	25,795		43,053
Less: amounts representing interest		*		11,241
Present value of net minimum lease payments		*		31,812
Less: Current portion of lease obligations		*		1,832
Non-current portion of lease obligations		*		29,980

* Not applicable for operating leases

TECHNICAL PACKAGING DIVESTITURE (Tables)

6 Months Ended

Mar. 31, 2020

TECHNICAL PACKAGING DIVESTITURE

Schedule of major classes of the Technical Packaging business assets and liabilities held for sale


	September 30, 2019
Assets:
Accounts receivable, net	$	15.7
Contract assets, net		5.1
Inventories		3.9
Other current assets		0.6
Current assets		25.3
Property, plant & equipment, net		33.6
Intangible assets, net		11.4
Goodwill		19.0
Other assets		3.4
Total assets	$	92.7
Liabilities:
Accounts payable	$	7.6
Accrued expenses and other current liabilities		3.9
Current liabilities		11.5
Other liabilities		4.0
Total liabilities	$	15.5

- Definition

Tabular disclosure of information related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component.

+ References

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+ Details

EARNINGS PER SHARE (EPS) (Tables)

6 Months Ended

Mar. 31, 2020

EARNINGS PER SHARE (EPS)

Schedule of weighted average number of shares used in the calculation of earnings per share


	Three Months		Six Months
	Ended March 31,		Ended March 31,
	2020	2019	2020	2019

Weighted Average Shares Outstanding - Basic	25,988	25,918	25,985	25,915
Dilutive Options and Restricted Shares	100	118	141	163
Adjusted Shares - Diluted	26,088	26,036	26,126	26,078

INVENTORIES (Tables)

6 Months Ended

Mar. 31, 2020

INVENTORIES

Schedule of inventories


	March 31,		September 30,
(In thousands)	2020		2019

Finished goods	$	23,898		23,550
Work in process		39,768		26,407
Raw materials		77,361		74,999
Total inventories	$	141,027		124,956

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Mar. 31, 2020

GOODWILL AND OTHER INTANGIBLE ASSETS

Schedule of goodwill and intangible assets


	March 31,		September 30,
(Dollars in thousands)	2020		2019
Goodwill	$	389,630		390,256

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,067		1,945
Less: accumulated amortization		806		748
Net	$	1,261		1,197

Capitalized software
Gross carrying amount	$	83,243		78,962
Less: accumulated amortization		53,034		48,530
Net	$	30,209		30,432

Customer relationships
Gross carrying amount	$	226,946		227,225
Less: accumulated amortization		61,486		55,326
Net	$	165,460		171,899

Other
Gross carrying amount	$	5,081		5,441
Less: accumulated amortization		2,953		2,645
Net	$	2,128		2,796
Intangible assets with indefinite lives:
Trade names	$	172,721		175,281

Schedule of carrying amount of goodwill attributable to each business segment


					Aerospace
(Dollars in millions)	USG		Test		& Defense		Total
Balance as of September 30, 2019		254.0		34.1		102.2		390.3
Foreign currency translation		(0.6)		(0.1)		—		(0.7)
Balance as of March 31, 2020	$	253.4		34.0		102.2		389.6

BUSINESS SEGMENT INFORMATION (Tables)

6 Months Ended

Mar. 31, 2020

BUSINESS SEGMENT INFORMATION

Schedule of Net Sales and Earnings Before Income Tax


	Three Months				Six Months
	Ended March 31,				Ended September 30,
(In thousands)	2020		2019		2020	2019
NET SALES
Aerospace & Defense	$	95,124		79,478	172,635	145,702
Test		41,600		42,875	82,983	84,161
USG		43,768		48,890	96,602	104,745
Consolidated totals	$	180,492		171,243	352,220	334,608

EBIT
Aerospace & Defense	$	21,736		17,443	34,249	28,053
Test		5,651		5,554	10,307	8,864
USG		4,866		8,767	14,153	30,313
Corporate (loss)		(10,908)		(9,788)	(20,573)	(19,904)
Consolidated EBIT		21,345		21,976	38,136	47,326
Less: Interest expense		(1,320)		(1,853)	(3,741)	(3,708)
Earnings before income taxes	$	20,025		20,123	34,395	43,618

DEBT (Tables)

6 Months Ended

Mar. 31, 2020

DEBT

Schedule of debt


	March 31,		September 30,
(In thousands)	2020		2019
Total borrowings	$	150,000		285,000
Current portion of long-term debt		(20,000)		(20,000)
Total long-term debt, less current portion	$	130,000		265,000

SHAREHOLDERS' EQUITY (Tables)

6 Months Ended

Mar. 31, 2020

SHAREHOLDERS' EQUITY

Schedule of change in shareholders' equity

The change in shareholders’ equity for the first three and six months of 2020 and 2019 is shown below (in thousands):


	Three Months Ended March 31,		Six Months Ended March 31,
	2020	2019	2020	2019

Common stock
Beginning balance	306	305	306	305
Stock plans	—	—	—	—
Ending balance	306	305	306	305

Additional paid-in-capital
Beginning balance	293,056	292,293	292,408	291,190
Stock plans	1,731	1,319	2,379	2,422
Ending balance	294,787	293,612	294,787	293,612

Retained earnings
Beginning balance	769,439	627,670	684,741	606,837
Net earnings common stockholders	17,822	18,797	104,599	36,114
Dividends paid	(2,077)	(2,074)	(4,156)	(4,147)
Adoption of accounting standards updates	—	(1,375)	—	4,214
Ending balance	785,184	643,018	785,184	643,018

Accumulated other comprehensive income (loss)
Beginning balance	(40,051)	(36,083)	(43,974)	(31,528)
Foreign currency translation	(6,885)	677	(2,962)	(3,853)
Pension	—	—	—	—
Forward exchange contracts	—	126	—	101
Ending balance	(46,936)	(35,280)	(46,936)	(35,280)

Treasury stock
Beginning balance	(107,259)	(107,394)	(107,259)	(107,394)
Issued under stock plans	125	135	125	135
Ending balance	(107,134)	(107,259)	(107,134)	(107,259)

Total equity	926,207	794,396	926,207	794,396

RETIREMENT PLANS (Tables)

6 Months Ended

Mar. 31, 2020

RETIREMENT PLANS

Schedule of components of net periodic benefit cost


	Three Months				Six Months
	Ended March 31,				Ended March 31,
(In thousands)	2020		2019		2020	2019
Defined benefit plans
Interest cost	$	824		875	1,648	1,750
Expected return on assets		(1,041)		(1,086)	(2,082)	(2,172)
Amortization of:
Prior service cost		—		—	—	—
Actuarial loss		543		487	1,087	974
Net periodic benefit cost	$	326		276	653	552

DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Mar. 31, 2020

DERIVATIVE FINANCIAL INSTRUMENTS

Schedule of outstanding derivative financial instruments


		Fair
	Notional	Value		Fix
(In thousands)	amount	(US$)		Rate
Forward contracts	6,250	USD	(381)
Interest rate swap	150,000	USD	(1,997)	2.24	%

FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Mar. 31, 2020

FAIR VALUE MEASUREMENTS

Schedule of fair value of financial instruments


(In thousands)	Level 1		Level 2		Level 3		Total
Assets (Liabilities):
Forward contracts and interest rate swaps	$	—		(2,378)	$	—		(2,378)

REVENUES (Tables)

6 Months Ended

Mar. 31, 2020

REVENUES

Schedule of disaggregation of revenue by reportable segment


Three months ended March 31, 2020	Aerospace
(In thousands)	& Defense		Test		USG		Total
Customer type:
Commercial	$	51,550	$	33,952	$	43,736	$	129,238
U.S. Government		43,574		7,648		32		51,254
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492

Geographic location:
United States	$	81,458	$	25,121	$	28,706	$	135,285
International		13,666		16,479		15,062		45,207
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492

Revenue recognition method:
Point in time	$	46,610	$	8,009	$	32,209	$	86,828
Over time		48,514		33,591		11,559		93,664
Total revenues	$	95,124	$	41,600	$	43,768	$	180,492


Six months ended March 31, 2020	Aerospace
(In thousands)	& Defense		Test		USG		Total
Customer type:
Commercial	$	93,417	$	69,194	$	95,971	$	258,582
U.S. Government		79,218		13,789		631		93,638
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

Geographic location:
United States	$	146,164	$	49,959	$	63,665	$	259,788
International		26,471		33,024		32,937		92,432
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

Revenue recognition method:
Point in time	$	82,897	$	17,019	$	72,524	$	172,440
Over time		89,738		65,964		24,078		179,780
Total revenues	$	172,635	$	82,983	$	96,602	$	352,220

LEASES (Tables)

6 Months Ended

Mar. 31, 2020

LEASES

Schedule of components of lease costs


	Three Months		Six Months
	Ended		Ended
	March 31,		March 31,
(Dollars in thousands)	2020		2020
Finance lease cost
Amortization of right-of-use assets	$	622	$	1,245
Interest on lease liabilities		323		651
Operating lease cost		1,402		2,750
Total lease costs	$	2,347	$	4,646

Schedule of additional information related to leases


	Three Months		Six Months
	Ended		Ended
	March 31,		September 30,
(Dollars in thousands)	2020		2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,380	$	2,717
Operating cash flows from finance leases		198		335
Financing cash flows from finance leases		376		727
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	1,566	$	22,268
Weighted-average remaining lease term
Operating leases				6.37	years
Finance leases				12.97	years
Weighted-average discount rate
Operating leases				3.14	%
Finance leases				4.29	%

Schedule of reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets


(Dollars in thousands)		Operating	Finance
Years Ending September 30:	Leases		Leases
2020 (excluding the six months ended March 31, 2020)	$	2,667		1,455
2021		4,696		2,930
2022		4,036		3,011
2023		3,090		3,094
2024 and thereafter		6,931		31,481
Total minimum lease payments		21,420		41,971
Less: amounts representing interest		2,202		10,821
Present value of net minimum lease payments	$	19,218		31,150
Less: current portion of lease obligations		4,208		1,902
Non-current portion of lease obligations		15,010		29,248
ROU assets	$	18,901		28,072

Schedule of future minimum lease payments for operating and capital leases under ASC 840


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2020	$	5,574		2,518
2021		4,558		2,930
2022		3,950		3,012
2023		3,270		3,094
2024 and thereafter		8,443		31,499
Total minimum lease payments	$	25,795		43,053
Less: amounts representing interest		*		11,241
Present value of net minimum lease payments		*		31,812
Less: Current portion of lease obligations		*		1,832
Non-current portion of lease obligations		*		29,980

TECHNICAL PACKAGING DIVESTITURE (Details) $ in Thousands	3 Months Ended			6 Months Ended
TECHNICAL PACKAGING DIVESTITURE (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($) item	Mar. 31, 2019 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)
TECHNICAL PACKAGING DIVESTITURE
Net proceeds from sale of discontinued operations				$ 183,997
After-tax gain on the sale of business				76,614
Assets:
Current assets						$ 25,314
Liabilities:
Current liabilities						11,517
Other liabilities						3,999
Disposed of by Sale \| Technical Packaging Business
TECHNICAL PACKAGING DIVESTITURE
Net sales	$ 0		$ 22,700	$ 16,500	$ 41,900
Net proceeds from sale of discontinued operations		$ 184,000
After-tax gain on the sale of business		$ 76,600
Assets:
Accounts receivable, net						15,700
Contract assets, net						5,100
Inventories						3,900
Other current assets						600
Current assets						25,300
Property, plant & equipment, net						33,600
Intangible assets, net						11,400
Goodwill						19,000
Other assets						3,400
Total assets						92,700
Liabilities:
Accounts payable						7,600
Accrued expenses and other current liabilities						3,900
Current liabilities						11,500
Other liabilities						4,000
Total liabilities						$ 15,500
Disposed of by Sale \| Technical Packaging Business \| Sonoco Products Company
TECHNICAL PACKAGING DIVESTITURE
Number of wholly-owned subsidiaries of the buyers \| item		2

ACCOUNTING STANDARDS UPDATE (Details) $ in Thousands	Mar. 31, 2020 USD ($)
ACCOUNTING STANDARDS UPDATE
Right-of-use assets	$ 18,901
Right-of-use liabilities	15,010
Restatement adjustment \| Lease Standard
ACCOUNTING STANDARDS UPDATE
Right-of-use assets	20,000
Right-of-use liabilities	$ 20,000

EARNINGS PER SHARE (EPS) (Details) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
EARNINGS PER SHARE (EPS)
Weighted Average Shares Outstanding - Basic	25,988	25,918	25,985	25,915
Dilutive Options and Restricted Shares	100	118	141	163
Adjusted Shares - Diluted	26,088	26,036	26,126	26,078

SHARE-BASED COMPENSATION (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
SHARE-BASED COMPENSATION (Details) - USD ($) $ in Millions	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Selling, general and administrative expenses
SHARE-BASED COMPENSATION
Total share-based compensation cost	$ 1.5	$ 1.2	$ 2.9	$ 2.6
Performance-Accelerated Restricted Share Awards
SHARE-BASED COMPENSATION
Pretax compensation expense	$ 1.1	0.9	$ 2.3	2.0
Non-vested shares	175,577		175,577
Non-Employee Directors Plan
SHARE-BASED COMPENSATION
Pretax compensation expense	$ 0.3	0.3	$ 0.6	0.5
Total income tax benefit recognized	0.3	$ 0.3	0.7	$ 0.6
Total unrecognized compensation cost related to share-based compensation arrangements	$ 6.8		$ 6.8
Remaining weighted-average period for recognition of total unrecognized compensation cost	2 years 1 month 6 days

INVENTORIES (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Sep. 30, 2019
INVENTORIES
Finished goods	$ 23,898	$ 23,550
Work in process	39,768	26,407
Raw materials	77,361	74,999
Total inventories	$ 141,027	$ 124,956

GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Sep. 30, 2019
GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill	$ 389,630	$ 390,256
Less: accumulated amortization	118,277	107,247
Patents
GOODWILL AND OTHER INTANGIBLE ASSETS
Gross carrying amount	2,067	1,945
Less: accumulated amortization	806	748
Net	1,261	1,197
Capitalized software
GOODWILL AND OTHER INTANGIBLE ASSETS
Gross carrying amount	83,243	78,962
Less: accumulated amortization	53,034	48,530
Net	30,209	30,432
Customer relationships
GOODWILL AND OTHER INTANGIBLE ASSETS
Gross carrying amount	226,946	227,225
Less: accumulated amortization	61,486	55,326
Net	165,460	171,899
Other
GOODWILL AND OTHER INTANGIBLE ASSETS
Gross carrying amount	5,081	5,441
Less: accumulated amortization	2,953	2,645
Net	2,128	2,796
Trade names
GOODWILL AND OTHER INTANGIBLE ASSETS
Trade names	$ 172,721	$ 175,281

GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in carrying amount of goodwill (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2020 USD ($)
Changes in goodwill
Goodwill, Beginning Balance	$ 390,256
Foreign currency translation	(700)
Goodwill, Ending Balance	389,630
USG
Changes in goodwill
Goodwill, Beginning Balance	254,000
Foreign currency translation	(600)
Goodwill, Ending Balance	253,400
Test
Changes in goodwill
Goodwill, Beginning Balance	34,100
Foreign currency translation	(100)
Goodwill, Ending Balance	34,000
Aerospace & Defense
Changes in goodwill
Goodwill, Beginning Balance	102,200
Goodwill, Ending Balance	$ 102,200

BUSINESS SEGMENT INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
BUSINESS SEGMENT INFORMATION
NET SALES	$ 180,492	$ 171,243	$ 352,220	$ 334,608
Consolidated EBIT	21,345	21,976	38,136	47,326
Less: Interest expense	(1,320)	(1,853)	(3,741)	(3,708)
Earnings before income taxes	20,025	20,123	34,395	43,618
Aerospace & Defense
BUSINESS SEGMENT INFORMATION
NET SALES	95,124	79,478	172,635	145,702
Consolidated EBIT	21,736	17,443	34,249	28,053
Test
BUSINESS SEGMENT INFORMATION
NET SALES	41,600	42,875	82,983	84,161
Consolidated EBIT	5,651	5,554	10,307	8,864
USG
BUSINESS SEGMENT INFORMATION
NET SALES	43,768	48,890	96,602	104,745
Consolidated EBIT	4,866	8,767	14,153	30,313
Corporate (loss)
BUSINESS SEGMENT INFORMATION
Consolidated EBIT	$ (10,908)	$ (9,788)	$ (20,573)	$ (19,904)

DEBT (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Sep. 30, 2019
DEBT
Total borrowings	$ 150,000	$ 285,000
Current portion of long-term debt	(20,000)	(20,000)
Total long-term debt, less current portion	$ 130,000	$ 265,000

DEBT - Additional information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Sep. 30, 2019
DEBT
Available to borrow under the credit facility	$ 341,000		$ 341,000
Cash on hand	100,195		100,195		$ 61,808
Letters of Credit Outstanding, Amount	$ 9,800		$ 9,800
Equity interests in direct and indirect material foreign subsidiaries, pledged as collateral (as a percent)	100.00%		100.00%
Weighted average interest rates	3.24%	3.20%	3.21%	3.23%
Long-term Debt, Current Maturities	$ 20,000		$ 20,000
Revolving Credit Facility
DEBT
Line of Credit Facility, Amount Outstanding	500,000		500,000
Line of Credit Facility, Commitment Fee Amount			250,000
Maximum
DEBT
Incremental term loan	$ 250,000		$ 250,000

INCOME TAX EXPENSE (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
INCOME TAX EXPENSE (Details) - USD ($) $ in Millions	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
INCOME TAX EXPENSE
Effective income tax rate	11.00%	11.40%	16.90%	19.40%
Increase (decrease) in valuation allowance (as a percent)	(14.30%)	12.90%	(8.20%)	5.90%
Reduction in valuation allowance for excess foreign tax credits	$ 2.8	$ 2.3
Amended return receivable		$ 0.2

SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Changes in shareholder's equity
Beginning Balance			$ 826,222
Net earnings common stockholders	$ 17,822	$ 18,797	104,599	$ 36,114
Ending Balance	926,207	794,396	926,207	794,396
Common Stock
Changes in shareholder's equity
Beginning Balance	306	305	306	305
Ending Balance	306	305	306	305
Common Stock Including Additional Paid in Capital
Changes in shareholder's equity
Beginning Balance	293,056	292,293	292,408	291,190
Stock compensation plans	1,731	1,319	2,379	2,422
Ending Balance	294,787	293,612	294,787	293,612
Retained Earnings
Changes in shareholder's equity
Beginning Balance	769,439	627,670	684,741	606,837
Net earnings common stockholders	17,822	18,797	104,599	36,114
Dividends paid	(2,077)	(2,074)	(4,156)	(4,147)
Adoption of accounting standards updates		(1,375)		4,214
Ending Balance	785,184	643,018	785,184	643,018
Accumulated other comprehensive income (loss)
Changes in shareholder's equity
Beginning Balance	(40,051)	(36,083)	(43,974)	(31,528)
Foreign currency translation	(6,885)	677	(2,962)	(3,853)
Forward exchange contracts		126		101
Ending Balance	(46,936)	(35,280)	(46,936)	(35,280)
Treasury Stock
Changes in shareholder's equity
Beginning Balance	(107,259)	(107,394)	(107,259)	(107,394)
Issued under stock plans	125	135	125	135
Ending Balance	$ (107,134)	$ (107,259)	$ (107,134)	$ (107,259)

RETIREMENT PLANS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
RETIREMENT PLANS (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
RETIREMENT PLANS
Interest cost	$ 824	$ 875	$ 1,648	$ 1,750
Expected return on assets	(1,041)	(1,086)	(2,082)	(2,172)
Actuarial loss	(543)	(487)	(1,087)	(974)
Net periodic benefit cost	$ 326	$ 276	$ 653	$ 552

DERIVATIVE FINANCIAL INSTRUMENTS (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Interest rate swap
DERIVATIVE FINANCIAL INSTRUMENTS
Notional amount	$ 150,000
Fair Value	$ (1,997)
Fix Rate	2.24%
Forward contracts
DERIVATIVE FINANCIAL INSTRUMENTS
Notional amount	$ 6,250
Fair Value	$ (381)

FAIR VALUE MEASUREMENTS (Details) - Forward contracts and interest rate swaps $ in Thousands	Mar. 31, 2020 USD ($)
DERIVATIVE FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments	$ (2,378)
Level 2
DERIVATIVE FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments	$ (2,378)

REVENUES - Disaggregation of Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of revenues
Total revenues	$ 180,492	$ 171,243	$ 352,220	$ 334,608
Point in time
Disaggregation of revenues
Total revenues	86,828		172,440
Over time
Disaggregation of revenues
Total revenues	93,664		179,780
United States
Disaggregation of revenues
Total revenues	135,285		259,788
International
Disaggregation of revenues
Total revenues	45,207		92,432
Commercial
Disaggregation of revenues
Total revenues	129,238		258,582
U.S. Government
Disaggregation of revenues
Total revenues	51,254		93,638
Aerospace & Defense
Disaggregation of revenues
Total revenues	95,124	79,478	172,635	145,702
Aerospace & Defense \| Point in time
Disaggregation of revenues
Total revenues	46,610		82,897
Aerospace & Defense \| Over time
Disaggregation of revenues
Total revenues	48,514		89,738
Aerospace & Defense \| United States
Disaggregation of revenues
Total revenues	81,458		146,164
Aerospace & Defense \| International
Disaggregation of revenues
Total revenues	13,666		26,471
Aerospace & Defense \| Commercial
Disaggregation of revenues
Total revenues	51,550		93,417
Aerospace & Defense \| U.S. Government
Disaggregation of revenues
Total revenues	43,574		79,218
Test
Disaggregation of revenues
Total revenues	41,600	42,875	82,983	84,161
Test \| Point in time
Disaggregation of revenues
Total revenues	8,009		17,019
Test \| Over time
Disaggregation of revenues
Total revenues	33,591		65,964
Test \| United States
Disaggregation of revenues
Total revenues	25,121		49,959
Test \| International
Disaggregation of revenues
Total revenues	16,479		33,024
Test \| Commercial
Disaggregation of revenues
Total revenues	33,952		69,194
Test \| U.S. Government
Disaggregation of revenues
Total revenues	7,648		13,789
USG
Disaggregation of revenues
Total revenues	43,768	$ 48,890	96,602	$ 104,745
USG \| Point in time
Disaggregation of revenues
Total revenues	32,209		72,524
USG \| Over time
Disaggregation of revenues
Total revenues	11,559		24,078
USG \| United States
Disaggregation of revenues
Total revenues	28,706		63,665
USG \| International
Disaggregation of revenues
Total revenues	15,062		32,937
USG \| Commercial
Disaggregation of revenues
Total revenues	43,736		95,971
USG \| U.S. Government
Disaggregation of revenues
Total revenues	$ 32		$ 631

REVENUES - Remaining Performance Obligations (Details) $ in Millions	Mar. 31, 2020 USD ($)
Remaining Performance Obligations
Revenue, Remaining Performance Obligation, Amount	$ 565
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Remaining Performance Obligations
Percentage of remaining performance obligation expected to be recognized	68.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	12 months

REVENUES - Contract assets and liabilities (Details) $ in Millions	6 Months Ended
	Mar. 31, 2020 USD ($)
REVENUES
Contract with Customer, Asset, Net	$ 96.1
Contract with Customer, Liability	95.4
Contract with Customer, Liability, Revenue Recognized	$ 36.4

LEASES - Components of lease costs (Details) $ in Thousands	3 Months Ended	6 Months Ended
LEASES - Components of lease costs (Details) $ in Thousands	Mar. 31, 2020 USD ($)	Mar. 31, 2020 USD ($)
Leases
Option to extend	true
Finance lease cost
Amortization of right-of-use assets	$ 622	$ 1,245
Interest on lease liabilities	323	651
Operating lease cost	1,402	2,750
Total lease costs	$ 2,347	$ 4,646
Maximum
Leases
Lease term	20 years	20 years

LEASES - Additional information related to leases (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2020 USD ($)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 1,380	$ 2,717
Operating cash flows from finance leases	198	335
Financing cash flows from finance leases	376	727
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$ 1,566	$ 22,268
Weighted-average remaining lease term
Operating leases	6 years 4 months 13 days	6 years 4 months 13 days
Finance leases	12 years 11 months 19 days	12 years 11 months 19 days
Weighted-average discount rate
Operating leases	3.14%	3.14%
Finance leases	4.29%	4.29%

LEASES - Reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets (Details) $ in Thousands	Mar. 31, 2020 USD ($)
Operating leases
2020 (excluding the six months ended March 31, 2020)	$ 2,667
2021	4,696
2022	4,036
2023	3,090
2024 and thereafter	6,931
Total minimum lease payments	21,420
Less: amounts representing interest	2,202
Present value of net minimum lease payments	19,218
Less: Current portion of lease obligations	4,208
Non-current portion of lease obligations	15,010
ROU assets	18,901
Finance leases
2020 (excluding the six months ended March 31, 2020)	1,455
2021	2,930
2022	3,011
2023	3,094
2024 and thereafter	31,481
Total minimum lease payments	41,971
Less: amounts representing interest	10,821
Present value of net minimum lease payments	31,150
Less: Current portion of lease obligations	1,902
Non-current portion of lease obligations	29,248
ROU assets	$ 28,072
Location of operating lease liabilities included on Consolidated Balance Sheets	us-gaap:OtherAccruedLiabilitiesCurrent us-gaap:OperatingLeaseLiabilityNoncurrent
Location of finance lease liabilities included on Consolidated Balance Sheets	us-gaap:OtherAccruedLiabilitiesCurrent us-gaap:OtherLiabilitiesNoncurrent
Location of operating lease ROU assets included on Consolidated Balance Sheets	us-gaap:OperatingLeaseRightOfUseAsset
Location of finance lease ROU assets included on Consolidated Balance Sheets	us-gaap:PropertyPlantAndEquipmentNet

LEASES - Future minimum lease payments for operating and capital leases under ASC 840 (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Operating leases
2020	$ 5,574
2021	4,558
2022	3,950
2023	3,270
2024 and thereafter	8,443
Total minimum lease payments	25,795
Finance leases
2020	2,518
2021	2,930
2022	3,012
2023	3,094
2024 and thereafter	31,499
Total minimum lease payments	43,053
Less: amounts representing interest	11,241
Present value of net minimum lease payments	31,812
Less: Current portion of lease obligations	1,832
Non-current portion of lease obligations	$ 29,980