0001410578-23-000086 | 10-Q | XBRL Viewer

EARNINGS PER SHARE (EPS) (Details) - shares shares in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
EARNINGS PER SHARE (EPS)
Weighted Average Shares Outstanding - Basic	25,863	26,060
Dilutive Restricted Shares	80	82
Adjusted Shares - Diluted	25,943	26,142

SHARE-BASED COMPENSATION (Details) - USD ($) $ in Millions	3 Months Ended
SHARE-BASED COMPENSATION (Details) - USD ($) $ in Millions	Dec. 31, 2022	Dec. 31, 2021
Selling, general and administrative expenses
SHARE-BASED COMPENSATION
Total share-based compensation cost	$ 1.9	$ 1.7
Total income tax benefit recognized	0.1	0.4
Performance-Accelerated Restricted Share (PARS) Awards
SHARE-BASED COMPENSATION
Pretax compensation expense	$ 1.6	1.4
Non-vested shares	223,233
Compensation Plan for Non-Employee Directors
SHARE-BASED COMPENSATION
Pretax compensation expense	$ 0.3	$ 0.3
Total income tax benefit recognized	$ 12.0
Weighted average period	2 years

INCOME TAX EXPENSE	3 Months Ended
Dec. 31, 2022
INCOME TAX EXPENSE
INCOME TAX EXPENSE	8. INCOME TAX EXPENSE The first quarter 2023 effective income tax rate was 22.1% compared to 22.3% in the first quarter of 2022. The income tax expense in the first quarter of 2023 was favorably impacted by excess tax benefit related to the vesting of share-based compensation and the release of a valuation allowance on acquired federal net operating losses, decreasing the effective tax rate for the quarter by 1.3%.Income tax expense in the first quarter of 2022 was favorably impacted by excess tax benefit related to the vesting of share-based compensation, decreasing the effective tax rate for the quarter by 1.7%.

INCOME TAX EXPENSE

3 Months Ended

Dec. 31, 2022

INCOME TAX EXPENSE

INCOME TAX EXPENSE

8. INCOME TAX EXPENSE

The first quarter 2023 effective income tax rate was 22.1% compared to 22.3% in the first quarter of 2022. The income tax expense in the first quarter of 2023 was favorably impacted by excess tax benefit related to the vesting of share-based compensation and the release of a valuation allowance on acquired federal net operating losses, decreasing the effective tax rate for the quarter by 1.3%.Income tax expense in the first quarter of 2022 was favorably impacted by excess tax benefit related to the vesting of share-based compensation, decreasing the effective tax rate for the quarter by 1.7%.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

BUSINESS SEGMENT INFORMATION

3 Months Ended

Dec. 31, 2022

BUSINESS SEGMENT INFORMATION

BUSINESS SEGMENT INFORMATION

6. BUSINESS SEGMENT INFORMATION

The Company is organized based on the products and services that it offers and classifies its business operations in three reportable segments for financial reporting purposes: Aerospace & Defense (A&D), Utility Solutions Group (USG) and RF Shielding and Test (Test).The A&D segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Mayday Manufacturing Co. (Mayday), Westland Technologies, Inc. (Westland) and Globe Composite Solutions, LLC (Globe). The companies within this segment primarily design and manufacture specialty filtration, fluid control and naval products, including hydraulic filter elements and fluid control devices used in aerospace and defense applications; unique filter mechanisms used in micro-propulsion devices for satellites, 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 USG segment’s operations consist primarily of Doble Engineering Company and related subsidiaries including Morgan Schaffer and Altanova (collectively, Doble), and NRG Systems, Inc. (NRG). Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high voltage power delivery equipment. It combines three core elements for customers – diagnostic test and condition monitoring instruments, expert consulting, and testing services – and provides access to its large reserve of related empirical knowledge. NRG is a global market leader in the design and manufacture of decision support tools for the renewable energy industry, primarily wind and solar.

The Test segment’s operations consist primarily of ETS-Lindgren Inc. and related subsidiaries (ETS-Lindgren). ETS-Lindgren is an industry leader in designing and manufacturing products which provide 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.

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
	Ended December 31,
(In thousands)	2022		2021
NET SALES
Aerospace & Defense	$	82,983	70,244
USG		71,045	63,485
Test		51,473	43,281
Consolidated totals	$	205,501	177,010

EBIT
Aerospace & Defense	$	12,536	9,955
USG		16,131	13,391
Test		5,411	3,965
Corporate (loss)		(13,521)	(11,741)
Consolidated EBIT		20,557	15,570
Less: Interest expense		(1,658)	(733)
Earnings before income taxes	$	18,899	14,837

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 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.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

SHAREHOLDERS' EQUITY

3 Months Ended

Dec. 31, 2022

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

9. SHAREHOLDERS’ EQUITY

The change in shareholders’ equity for the first three months ended December 31, 2022 and 2021 is shown below (in thousands):


	Three Months Ended December 31,
	2022		2021

Common stock
Beginning balance	$	307	307
Stock plans		—	—
Ending balance		307	307

Additional paid-in-capital
Beginning balance		301,553	297,644
Stock plans		(856)	(1,367)
Ending balance		300,697	296,277

Retained earnings
Beginning balance		905,022	830,989
Net earnings common stockholders		14,727	11,524
Dividends paid		(2,067)	(2,079)
Ending balance		917,682	840,434

Accumulated other comprehensive income (loss)
Beginning balance		(31,764)	(2,161)
Foreign currency translation		11,513	(2,500)
Ending balance		(20,251)	(4,661)

Treasury stock
Beginning balance		(126,961)	(107,083)
Share repurchases		(5,076)	(9,997)
Ending balance		(132,037)	(117,080)

Total equity	$	1,066,398	1,015,277

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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+ Details

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net earnings	$ 14,727	$ 11,524
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	11,513	(2,500)
Total other comprehensive income (loss), net of tax	11,513	(2,500)
Comprehensive income	$ 26,240	$ 9,024

- Definition

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+ Details

SHARE-BASED COMPENSATION

3 Months Ended

Dec. 31, 2022

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

3. SHARE-BASED COMPENSATION

The Company provides compensation benefits to certain key employees under several share-based plans providing for performance-accelerated and/or time-vested restricted stock unit awards, and to non-employee directors under a separate compensation plan for non-employee directors.

Performance-Accelerated Restricted Stock Unit (PARS) Awards, Time-Vested Restricted Stock Unit (RSU) Awards, and Performance Share Unit (PSU) Awards

Compensation expense related to these awards was $1.6 million and $1.4 million for the three-month periods ended December 31, 2022 and 2021, respectively. There were 223,233 non-vested shares outstanding as of December 31, 2022.

Non-Employee Directors Plan

Compensation expense related to the non-employee director grants was $0.3 million and $0.3 million for the three-month periods ended December 31, 2022 and 2021, respectively.

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 $1.9 million and $1.7 million for the three-month periods ended December 31, 2022 and 2021, respectively. The total income tax benefit recognized in results of operations for share-based compensation arrangements was $0.1 million and $0.4 million for the three-month periods ended December 31, 2022 and 2021, respectively. As of December 31, 2022 there was $12.0 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 2.0 years.

INVENTORIES (Tables)

3 Months Ended

Dec. 31, 2022

INVENTORIES

Schedule of inventories, net


	December 31,		September 30,
(In thousands)	2022		2022
Finished goods	$	31,723	32,471
Work in process		46,514	38,492
Raw materials		103,506	91,440
Total inventories, net	$	181,743	162,403

INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
INVENTORIES
Finished goods	$ 31,723	$ 32,471
Work in process	46,514	38,492
Raw materials	103,506	91,440
Total inventories, net	$ 181,743	$ 162,403

GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Dec. 31, 2022

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

5.	GOODWILL AND OTHER INTANGIBLE ASSETS

Included on the Company’s Consolidated Balance Sheets at December 31, 2022 and September 30, 2022 are the following intangible assets gross carrying amounts and accumulated amortization from continuing operations:


	December 31,		September 30,
(Dollars in thousands)	2022		2022
Goodwill	$	498,383	492,709

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,373	2,353
Less: accumulated amortization		1,122	1,091
Net	$	1,251	1,262

Capitalized software
Gross carrying amount	$	109,379	106,583
Less: accumulated amortization		72,605	70,476
Net	$	36,774	36,107

Customer relationships
Gross carrying amount	$	291,067	287,447
Less: accumulated amortization		100,910	96,921
Net	$	190,157	190,526

Other
Gross carrying amount	$	14,322	13,985
Less: accumulated amortization		8,066	7,440
Net	$	6,256	6,545
Intangible assets with indefinite lives:
Trade names	$	160,386	160,024

The changes in the carrying amount of goodwill attributable to each business segment for the three months ended December 31, 2022 is as follows:


					Aerospace
(Dollars in millions)	USG		Test		& Defense	Total
Balance as of September 30, 2022	$	348.7		34.0	110.0	492.7
Foreign currency translation		5.7		—	—	5.7
Balance as of December 31, 2022	$	354.4		34.0	110.0	498.4

SHAREHOLDERS' EQUITY (Tables)

3 Months Ended

Dec. 31, 2022

SHAREHOLDERS' EQUITY

Schedule of change in shareholders' equity


	Three Months Ended December 31,
	2022		2021

Common stock
Beginning balance	$	307	307
Stock plans		—	—
Ending balance		307	307

Additional paid-in-capital
Beginning balance		301,553	297,644
Stock plans		(856)	(1,367)
Ending balance		300,697	296,277

Retained earnings
Beginning balance		905,022	830,989
Net earnings common stockholders		14,727	11,524
Dividends paid		(2,067)	(2,079)
Ending balance		917,682	840,434

Accumulated other comprehensive income (loss)
Beginning balance		(31,764)	(2,161)
Foreign currency translation		11,513	(2,500)
Ending balance		(20,251)	(4,661)

Treasury stock
Beginning balance		(126,961)	(107,083)
Share repurchases		(5,076)	(9,997)
Ending balance		(132,037)	(117,080)

Total equity	$	1,066,398	1,015,277

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

3 Months Ended

Dec. 31, 2022

GOODWILL AND OTHER INTANGIBLE ASSETS

Schedule of goodwill and intangible assets


	December 31,		September 30,
(Dollars in thousands)	2022		2022
Goodwill	$	498,383	492,709

Intangible assets with determinable lives:
Patents
Gross carrying amount	$	2,373	2,353
Less: accumulated amortization		1,122	1,091
Net	$	1,251	1,262

Capitalized software
Gross carrying amount	$	109,379	106,583
Less: accumulated amortization		72,605	70,476
Net	$	36,774	36,107

Customer relationships
Gross carrying amount	$	291,067	287,447
Less: accumulated amortization		100,910	96,921
Net	$	190,157	190,526

Other
Gross carrying amount	$	14,322	13,985
Less: accumulated amortization		8,066	7,440
Net	$	6,256	6,545
Intangible assets with indefinite lives:
Trade names	$	160,386	160,024

Schedule of carrying amount of goodwill attributable to each business segment


					Aerospace
(Dollars in millions)	USG		Test		& Defense	Total
Balance as of September 30, 2022	$	348.7		34.0	110.0	492.7
Foreign currency translation		5.7		—	—	5.7
Balance as of December 31, 2022	$	354.4		34.0	110.0	498.4

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

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+ Details

DEBT (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
DEBT
Total borrowings	$ 132,000	$ 153,000
Current portion of long-term debt	(20,000)	(20,000)
Total long-term debt, less current portion	$ 112,000	$ 133,000

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

DEBT

3 Months Ended

Dec. 31, 2022

DEBT

DEBT

7. DEBT

The Company’s debt is summarized as follows:


	December 31,		September 30,
(In thousands)	2022		2022
Total borrowings	$	132,000	153,000
Current portion of long-term debt		(20,000)	(20,000)
Total long-term debt, less current portion	$	112,000	133,000

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, with balance due by this date.

At December 31, 2022, the Company had approximately $360 million available to borrow under the Credit Facility, plus the $250 million increase option subject to lenders’ consent, in addition to $51.9 million cash on hand. The Company classified $20 million as the current portion of long-term debt as of December 31, 2022, 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 $8.2 million at December 31, 2022.

Interest on borrowings under the Credit Facility is calculated at a spread over either the New York Federal Reserve Bank Rate, the prime rate, or the London Interbank Offered Rate (LIBOR), 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 interest rate spreads on the facility and the facility fee are subject to increase or decrease depending on the Company’s leverage ratio. The weighted average interest rates were 4.56% and 1.17% for the three-month periods ending December 31, 2022 and 2021, respectively. As of December 31, 2022, the Company was in compliance with all covenants.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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+ Details

LEASES (Tables)

3 Months Ended

Dec. 31, 2022

LEASES

Schedule of components of lease costs


	Three Months Ended		Three Months Ended
	December 31,		December 31,
(Dollars in thousands)	2022		2021
Finance lease cost
Amortization of right-of-use assets	$	393		433
Interest on lease liabilities		236		267
Operating lease cost		1,645		1,561
Total lease costs	$	2,274		2,261

Schedule of additional information related to leases


	Three Months Ended			Three Months Ended
	December 31,			December 31,
(Dollars in thousands)	2022			2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,601			1,503
Operating cash flows from finance leases		236			267
Financing cash flows from finance leases		327			361
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	13,964			901
Weighted-average remaining lease term
Operating leases		11.6	years		9.9	years
Finance leases		11.7	years		12.5	years
Weighted-average discount rate
Operating leases		4.36	%		3.12	%
Finance leases		4.60	%		4.58	%

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

The following is a reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets, presented on the Consolidated Balance Sheet on December 31, 2022:


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2023 (excluding the three months ended December 31, 2022)	$	5,303	1,693
2024		6,280	2,315
2025		4,955	2,370
2026		4,073	2,434
2027 and thereafter		36,443	18,997
Total minimum lease payments		57,054	27,809
Less: amounts representing interest		13,296	6,954
Present value of net minimum lease payments	$	43,758	20,855
Less: current portion of lease obligations		5,412	1,359
Non-current portion of lease obligations	$	38,346	19,496

ROU assets	$	42,156	16,950

GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in carrying amount of goodwill (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2022 USD ($)
Goodwill and Other Intangible Assets
Beginning Balance	$ 492,709
Foreign currency translation and other	5,700
Ending Balance	498,383
USG
Goodwill and Other Intangible Assets
Beginning Balance	348,700
Foreign currency translation and other	5,700
Ending Balance	354,400
Test
Goodwill and Other Intangible Assets
Beginning Balance	34,000
Ending Balance	34,000
Aerospace & Defense
Goodwill and Other Intangible Assets
Beginning Balance	110,000
Ending Balance	$ 110,000

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

REVENUES - Remaining Performance Obligations (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2022	Sep. 30, 2022
Remaining Performance Obligations
Remaining performance obligations amount	$ 718.4
Revenue recognized	31.0
Contract assets	122.5
Contract liabilities	$ 133.6
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	80.00%
Revenue remaining performance obligation expected timing of satisfaction, Period	12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01
Remaining Performance Obligations
Contract assets		$ 125.2
Contract liabilities		$ 137.6

DEBT (Tables)

3 Months Ended

Dec. 31, 2022

DEBT

Schedule of debt


	December 31,		September 30,
(In thousands)	2022		2022
Total borrowings	$	132,000	153,000
Current portion of long-term debt		(20,000)	(20,000)
Total long-term debt, less current portion	$	112,000	133,000

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
CONDENSED CONSOLIDATED BALANCE SHEETS
Net of allowance for credit losses	$ 2,665	$ 2,612
Net of accumulated depreciation	171,143	165,322
Net of accumulated amortization	$ 182,789	$ 175,928
Preferred stock, par value per share	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Common stock, par value per share	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	30,745,335	30,707,748
Treasury stock, shares	4,912,636	4,854,997

FAIR VALUE MEASUREMENTS (Details)	Dec. 31, 2022 USD ($)
FAIR VALUE MEASUREMENTS
Fair value of financial instruments	$ 0

SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Thousands	3 Months Ended
SHAREHOLDERS' EQUITY (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Dec. 31, 2021
Changes in shareholder's equity
Beginning balance	$ 1,048,157
Net earnings common stockholders	14,727	$ 11,524
Ending balance	1,066,398	1,015,277
Common stock
Changes in shareholder's equity
Beginning balance	307	307
Ending balance	307	307
Additional paid-in-capital
Changes in shareholder's equity
Beginning balance	301,553	297,644
Stock plans	(856)	(1,367)
Ending balance	300,697	296,277
Retained earnings
Changes in shareholder's equity
Beginning balance	905,022	830,989
Net earnings common stockholders	14,727	11,524
Dividends paid	(2,067)	(2,079)
Ending balance	917,682	840,434
Accumulated other comprehensive income (loss)
Changes in shareholder's equity
Beginning balance	(31,764)	(2,161)
Foreign currency translation	11,513	(2,500)
Ending balance	(20,251)	(4,661)
Treasury stock
Changes in shareholder's equity
Beginning balance	(126,961)	(107,083)
Share repurchases	(5,076)	(9,997)
Ending balance	$ (132,037)	$ (117,080)

LEASES

3 Months Ended

Dec. 31, 2022

LEASES

LEASES

12. 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 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 Ended		Three Months Ended
	December 31,		December 31,
(Dollars in thousands)	2022		2021
Finance lease cost
Amortization of right-of-use assets	$	393		433
Interest on lease liabilities		236		267
Operating lease cost		1,645		1,561
Total lease costs	$	2,274		2,261

Additional information related to leases are shown below:


	Three Months Ended			Three Months Ended
	December 31,			December 31,
(Dollars in thousands)	2022			2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,601			1,503
Operating cash flows from finance leases		236			267
Financing cash flows from finance leases		327			361
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$	13,964			901
Weighted-average remaining lease term
Operating leases		11.6	years		9.9	years
Finance leases		11.7	years		12.5	years
Weighted-average discount rate
Operating leases		4.36	%		3.12	%
Finance leases		4.60	%		4.58	%


(Dollars in thousands)	Operating		Finance
Years Ending September 30:	Leases		Leases
2023 (excluding the three months ended December 31, 2022)	$	5,303	1,693
2024		6,280	2,315
2025		4,955	2,370
2026		4,073	2,434
2027 and thereafter		36,443	18,997
Total minimum lease payments		57,054	27,809
Less: amounts representing interest		13,296	6,954
Present value of net minimum lease payments	$	43,758	20,855
Less: current portion of lease obligations		5,412	1,359
Non-current portion of lease obligations	$	38,346	19,496

ROU assets	$	42,156	16,950

Operating lease liabilities are included on the Consolidated Balance Sheet in accrued other expenses (current portion) and as a caption on the Consolidated Balance Sheet (long-term portion). Finance lease liabilities are included on the Consolidated Balance Sheet in accrued other expenses (current portion) and other liabilities (long-term portion). 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 sheet.

BUSINESS SEGMENT INFORMATION (Details) $ in Thousands	3 Months Ended
BUSINESS SEGMENT INFORMATION (Details) $ in Thousands	Dec. 31, 2022 USD ($) segment	Dec. 31, 2021 USD ($)
BUSINESS SEGMENT INFORMATION
Net sales	$ 205,501	$ 177,010
EBIT	20,557	15,570
Less: Interest expense	(1,658)	(733)
Earnings before income taxes	$ 18,899	14,837
Number of reportable segments \| segment	3
Aerospace & Defense
BUSINESS SEGMENT INFORMATION
Net sales	$ 82,983	70,244
EBIT	12,536	9,955
USG
BUSINESS SEGMENT INFORMATION
Net sales	71,045	63,485
EBIT	16,131	13,391
Test
BUSINESS SEGMENT INFORMATION
Net sales	51,473	43,281
EBIT	5,411	3,965
Corporate (loss)
BUSINESS SEGMENT INFORMATION
EBIT	$ (13,521)	$ (11,741)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Net sales	$ 205,501	$ 177,010
Costs and expenses:
Cost of sales	126,383	108,305
Selling, general and administrative expenses	51,302	46,635
Amortization of intangible assets	6,861	6,467
Interest expense, net	1,658	733
Other expenses, net	398	33
Total costs and expenses	186,602	162,173
Earnings before income taxes	18,899	14,837
Income tax expense	4,172	3,313
Net earnings	$ 14,727	$ 11,524
Earnings per share:
Basic - Net earnings	$ 0.57	$ 0.44
Diluted - Net earnings	$ 0.57	$ 0.44

LEASES - Components of lease costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Leases
Option to extend	true
Finance lease cost:
Amortization of right-of-use assets	$ 393	$ 433
Interest on lease liabilities	236	267
Operating lease cost	1,645	1,561
Total lease cost	$ 2,274	$ 2,261
Maximum
Leases
Lease term	20 years

REVENUES - Disaggregation of Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	$ 205,501	$ 177,010
Point in time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	98,736	92,214
Over time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	106,765	84,796
United States
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	142,816	122,403
International
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	62,685	54,607
Commercial
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	152,894	131,954
U.S. Government
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	52,607	45,056
Aerospace & Defense
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	82,983	70,244
Aerospace & Defense \| Point in time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	33,604	28,558
Aerospace & Defense \| Over time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	49,379	41,686
Aerospace & Defense \| United States
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	68,934	60,687
Aerospace & Defense \| International
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	14,049	9,557
Aerospace & Defense \| Commercial
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	36,740	28,075
Aerospace & Defense \| U.S. Government
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	46,243	42,169
USG
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	71,045	63,485
USG \| Point in time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	56,031	50,835
USG \| Over time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	15,014	12,650
USG \| United States
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	46,379	38,741
USG \| International
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	24,666	24,744
USG \| Commercial
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	70,162	62,842
USG \| U.S. Government
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	883	643
Test
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	51,473	43,281
Test \| Point in time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	9,101	12,821
Test \| Over time
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	42,372	30,460
Test \| United States
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	27,503	22,975
Test \| International
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	23,970	20,306
Test \| Commercial
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	45,992	41,037
Test \| U.S. Government
Disaggregation of revenues
Revenue from contract with customer excluding assessed tax	$ 5,481	$ 2,244

INCOME TAX EXPENSE (Details)	3 Months Ended
INCOME TAX EXPENSE (Details)	Dec. 31, 2022	Dec. 31, 2021
INCOME TAX EXPENSE
Effective income tax rate	22.10%	22.30%
Decreasing the effective tax rate	1.30%	1.70%

DEBT - Additional information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
DEBT
Available to borrow under the credit facility	$ 360,000
Cash on hand	51,922	$ 97,724
Current maturities of long-term debt	20,000
Letters of credit outstanding, amount	$ 8,200
Debt, weighted average interest rate	4.56%		1.17%
Revolving Credit Facility
DEBT
Line of credit facility, amount outstanding	$ 500,000
Line of credit facility, commitment fee amount	250,000
Maximum
DEBT
Incremental term loan	$ 250,000

EARNINGS PER SHARE (EPS)

3 Months Ended

Dec. 31, 2022

EARNINGS PER SHARE (EPS)

EARNINGS PER SHARE (EPS)

2. 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
	Ended December 31,
	2022	2021
Weighted Average Shares Outstanding — Basic	25,863	26,060
Dilutive Restricted Shares	80	82
Adjusted Shares — Diluted	25,943	26,142

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
Current assets:
Cash and cash equivalents	$ 51,922	$ 97,724
Accounts receivable, net of allowance for credit losses of $2,665 and $2,612, respectively	159,658	164,645
Contract assets, net	122,518	125,154
Inventories, net	181,743	162,403
Other current assets	18,930	22,696
Total current assets	534,771	572,622
Property, plant and equipment, net of accumulated depreciation of $171,143 and $165,322, respectively	155,722	155,973
Intangible assets, net of accumulated amortization of $182,789 and $175,928, respectively	394,824	394,464
Goodwill	498,383	492,709
Operating lease assets	42,156	29,150
Other assets	10,133	9,538
Total assets	1,635,989	1,654,456
Current liabilities:
Current maturities of long-term debt and short-term borrowings	20,000	20,000
Accounts payable	73,770	78,746
Contract liabilities, net	121,220	125,009
Accrued salaries	27,339	40,572
Accrued other expenses	50,431	53,802
Total current liabilities	292,760	318,129
Deferred tax liabilities	81,213	82,023
Non-current operating lease liabilities	38,346	24,853
Other liabilities	45,272	48,294
Long-term debt	112,000	133,000
Total liabilities	569,591	606,299
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 30,745,335 and 30,707,748 shares, respectively	307	307
Additional paid-in capital	300,697	301,553
Retained earnings	917,682	905,022
Accumulated other comprehensive loss, net of tax	(20,251)	(31,764)
Total stockholders' equity before treasury stock	1,198,435	1,175,118
Less treasury stock, at cost: 4,912,636 and 4,854,997 common shares, respectively	(132,037)	(126,961)
Total shareholders' equity	1,066,398	1,048,157
Total liabilities and shareholders' equity	$ 1,635,989	$ 1,654,456

INVENTORIES

3 Months Ended

Dec. 31, 2022

INVENTORIES

INVENTORIES

4. INVENTORIES

Inventories, net, consist of the following:


	December 31,		September 30,
(In thousands)	2022		2022
Finished goods	$	31,723	32,471
Work in process		46,514	38,492
Raw materials		103,506	91,440
Total inventories, net	$	181,743	162,403

BUSINESS SEGMENT INFORMATION (Tables)

3 Months Ended

Dec. 31, 2022

BUSINESS SEGMENT INFORMATION

Schedule of net sales and earnings before income tax


	Three Months
	Ended December 31,
(In thousands)	2022		2021
NET SALES
Aerospace & Defense	$	82,983	70,244
USG		71,045	63,485
Test		51,473	43,281
Consolidated totals	$	205,501	177,010

EBIT
Aerospace & Defense	$	12,536	9,955
USG		16,131	13,391
Test		5,411	3,965
Corporate (loss)		(13,521)	(11,741)
Consolidated EBIT		20,557	15,570
Less: Interest expense		(1,658)	(733)
Earnings before income taxes	$	18,899	14,837

Document And Entity Information - shares	3 Months Ended
Document And Entity Information - shares	Dec. 31, 2022	Jan. 31, 2023
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2022
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		25,805,275
Entity Central Index Key	0000866706
Current Fiscal Year End Date	--09-30
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false

FAIR VALUE MEASUREMENTS

3 Months Ended

Dec. 31, 2022

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

10. 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 December 31, 2022 and September 30, 2022 using available market information or other appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, receivables, inventories, payables, 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, and are immaterial.

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-month period ended December 31, 2022.

- 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 (Tables)

3 Months Ended

Dec. 31, 2022

REVENUES

Schedule of disaggregation of revenue by reportable segment

Revenues by customer type, geographic location, and revenue recognition method for the three-month period ended December 31, 2022 are presented in the table 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 includes a reconciliation of the disaggregated revenue within each reportable segment.


	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	36,740	$	70,162	$	45,992	$	152,894
U.S. Government		46,243		883		5,481		52,607
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Geographic location:
United States	$	68,934	$	46,379	$	27,503	$	142,816
International		14,049		24,666		23,970		62,685
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Revenue recognition method:
Point in time	$	33,604	$	56,031	$	9,101	$	98,736
Over time		49,379		15,014		42,372		106,765
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Revenues by customer type, geographic location, and revenue recognition method for the three-month period ended December 31, 2021 are presented in the table below:


	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	28,075	$	62,842	$	41,037	$	131,954
U.S. Government		42,169		643		2,244		45,056
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

Geographic location:
United States	$	60,687	$	38,741	$	22,975	$	122,403
International		9,557		24,744		20,306		54,607
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

Revenue recognition method:
Point in time	$	28,558	$	50,835	$	12,821	$	92,214
Over time		41,686		12,650		30,460		84,796
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

GOODWILL AND OTHER INTANGIBLE ASSETS - Additional Information (Details) - USD ($)	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
GOODWILL AND OTHER INTANGIBLE ASSETS
Amortization expense related to intangible assets	$ 6,861,000	$ 6,467,000
Fair value of financial instruments	$ 0

BASIS OF PRESENTATION

3 Months Ended

Dec. 31, 2022

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).

The Company’s results for the three-month period ended December 31, 2022 are not necessarily indicative of the results for the entire 2023 fiscal year. References to the first quarters of 2023 and 2022 represent the fiscal quarters ended December 31, 2022 and 2021, 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.

EARNINGS PER SHARE (EPS) (Tables)

3 Months Ended

Dec. 31, 2022

EARNINGS PER SHARE (EPS)

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


	Three Months
	Ended December 31,
	2022	2021
Weighted Average Shares Outstanding — Basic	25,863	26,060
Dilutive Restricted Shares	80	82
Adjusted Shares — Diluted	25,943	26,142

LEASES - Reconciliation of future undiscounted cash flows to the operating and finance lease liabilities, and the related ROU assets (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
Operating leases
2023 (excluding the three months ended December 31, 2022)	$ 5,303
2024	6,280
2025	4,955
2026	4,073
2027 and thereafter	36,443
Total minimum lease payments	57,054
Less: amounts representing interest	13,296
Present value of net minimum lease payments	$ 43,758
Location of operating lease liabilities included on Consolidated Balance Sheets	Accrued other expenses, Other liabilities
Less: current portion of lease obligations	$ 5,412
Non-current portion of lease obligations	38,346	$ 24,853
ROU assets	$ 42,156	$ 29,150
Location of operating lease ROU assets included on Consolidated Balance Sheets	ROU assets
Finance leases
2023 (excluding the three months ended December 31, 2022)	$ 1,693
2024	2,315
2025	2,370
2026	2,434
2027 and thereafter	18,997
Total minimum lease payments	27,809
Less: amounts representing interest	6,954
Present value of net minimum lease payments	$ 20,855
Location of finance lease liabilities included on Consolidated Balance Sheets	Accrued other expenses, Other liabilities
Less: current portion of lease obligations	$ 1,359
Non-current portion of lease obligations	19,496
ROU assets	$ 16,950
Location of finance lease ROU assets included on Consolidated Balance Sheets	Property, Plant and Equipment, Net

REVENUES

3 Months Ended

Dec. 31, 2022

REVENUES

REVENUES

11. REVENUES

Disaggregation of Revenues


	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	36,740	$	70,162	$	45,992	$	152,894
U.S. Government		46,243		883		5,481		52,607
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Geographic location:
United States	$	68,934	$	46,379	$	27,503	$	142,816
International		14,049		24,666		23,970		62,685
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Revenue recognition method:
Point in time	$	33,604	$	56,031	$	9,101	$	98,736
Over time		49,379		15,014		42,372		106,765
Total revenues	$	82,983	$	71,045	$	51,473	$	205,501

Revenues by customer type, geographic location, and revenue recognition method for the three-month period ended December 31, 2021 are presented in the table below:


	Aerospace
(In thousands)	& Defense		USG		Test		Total
Customer type:
Commercial	$	28,075	$	62,842	$	41,037	$	131,954
U.S. Government		42,169		643		2,244		45,056
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

Geographic location:
United States	$	60,687	$	38,741	$	22,975	$	122,403
International		9,557		24,744		20,306		54,607
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

Revenue recognition method:
Point in time	$	28,558	$	50,835	$	12,821	$	92,214
Over time		41,686		12,650		30,460		84,796
Total revenues	$	70,244	$	63,485	$	43,281	$	177,010

Revenue Recognition

Payment terms with our customers vary by the type and location of the customer and the products or services offered. Arrangements with customers that include payment terms extending beyond one year are not significant. The transaction price for these contracts reflects our estimate of returns and discounts, which are based on historical, current and forecasted information to determine the expected amount to which we will be entitled in exchange for transferring the promised goods or services to the customer. The realization of variable consideration occurs within a short period of time from product delivery; therefore, the time value of money effect is not significant. We primarily provide standard warranty programs for products in our commercial businesses for periods that typically range from one to two years. These assurance-type programs typically cannot be purchased separately and do not meet the criteria to be considered a performance obligation. Under the typical payment terms of our long term fixed price contracts, the customer pays us either performance-based or progress payments. Performance-based payments represent interim payments based on quantifiable measures of performance or on the achievement of specified events or milestones. Progress payments are interim payments of costs incurred as the work progresses.

For our overtime revenue recognized using the output method of costs incurred, contract cost is estimated utilizing current contract specifications and expected engineering requirements. Contract costs typically are incurred over a period of several months to one or more years, and the estimation of these costs requires judgment. Our cost estimation process is based on the professional knowledge and experience of engineers and program managers along with finance professionals. We review and update our projections of costs quarterly or more frequently when circumstances significantly change. In addition, in the USG segment, we recognize revenue as a series of distinct services based on each day of providing services (straight-line over the contract term) for certain of our USG segment contracts. Under the typical payment terms of our service contracts, the customer pays us in advance of when services are performed. In addition, in the Test segment, we use milestones to measure progress for our Test segment contracts because it best depicts the transfer of control to the customer that occurs as we incur costs on our contracts.

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 December 31, 2022, the Company had $718.4 million in remaining performance obligations of which the Company expects to recognize revenues of approximately 80% 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. Because of the timing difference of revenue recognition and customer billing, these contracts will often result in revenue recognized in excess of billings and billings in excess of costs incurred. At December 31, 2022, contract assets and liabilities totaled $122.5 million and $133.6 million, respectively. During the first quarter of 2023, the Company recognized approximately $31.0 million in revenues that were included in the contract liabilities balance at September 30, 2022. At September 30, 2022, contract assets and liabilities totaled $125.2 million and $137.6 million, respectively.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

LEASES - Additional information related to leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 1,601	$ 1,503
Operating cash flows from finance leases	236	267
Financing cash flows from finance leases	327	361
Right-of-use assets obtained in exchange for lease liabilities
Operating leases	$ 13,964	$ 901
Weighted-average remaining lease term:
Operating leases	11 years 7 months 6 days	9 years 10 months 24 days
Finance leases	11 years 8 months 12 days	12 years 6 months
Weighted-average discount rate:
Operating leases	4.36%	3.12%
Finance leases	4.60%	4.58%

GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	Dec. 31, 2022	Sep. 30, 2022
Goodwill and Other Intangible Assets
Goodwill	$ 498,383	$ 492,709
Less: accumulated amortization	182,789	175,928
Trade names
Goodwill and Other Intangible Assets
Trade names	160,386	160,024
Customer relationships
Goodwill and Other Intangible Assets
Gross carrying amount	291,067	287,447
Less: accumulated amortization	100,910	96,921
Net	190,157	190,526
Capitalized software
Goodwill and Other Intangible Assets
Gross carrying amount	109,379	106,583
Less: accumulated amortization	72,605	70,476
Net	36,774	36,107
Patents
Goodwill and Other Intangible Assets
Gross carrying amount	2,373	2,353
Less: accumulated amortization	1,122	1,091
Net	1,251	1,262
Other
Goodwill and Other Intangible Assets
Gross carrying amount	14,322	13,985
Less: accumulated amortization	8,066	7,440
Net	$ 6,256	$ 6,545

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities:
Net earnings	$ 14,727	$ 11,524
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	12,367	12,172
Stock compensation expense	1,860	1,685
Changes in assets and liabilities	(36,920)	(30,837)
Effect of deferred taxes	(1,042)	7,402
Net cash (used) provided by operating activities	(9,008)	1,946
Cash flows from investing activities:
Acquisition of business, net of cash acquired		(15,592)
Additions to capitalized software	(2,795)	(1,958)
Capital expenditures	(4,791)	(14,133)
Net cash used by investing activities	(7,586)	(31,683)
Cash flows from financing activities:
Proceeds from long-term debt and short-term borrowings	17,000	74,000
Principal payments on long-term debt and short-term borrowings	(38,000)	(30,000)
Dividends paid	(2,067)	(2,079)
Purchases of common stock into treasury	(4,147)	(9,997)
Other	(2,412)	(2,737)
Net cash (used) provided by financing activities	(29,626)	29,187
Effect of exchange rate changes on cash and cash equivalents	418	33
Net decrease in cash and cash equivalents	(45,802)	(517)
Cash and cash equivalents, beginning of period	97,724	56,232
Cash and cash equivalents, end of period	51,922	55,715
Supplemental cash flow information:
Interest paid	1,875	388
Income taxes paid	$ 200	$ 195