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UNITED STATES

 

SECURITIES AND EXCHANGE COMMISSION

 

WASHINGTON, D.C. 20549

 

-----------------------------------------

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): November 7, 2024

 

ESCO TECHNOLOGIES INC.

 (Exact Name of Registrant as Specified in Charter)

 

Missouri 1-10596 43-1554045
(State or Other (Commission (I.R.S. Employer
Jurisdiction of Incorporation) File Number) Identification No.)

 

9900A Clayton Road, St. Louis, Missouri 63124-1186
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: 314-213-7200

 

Securities registered pursuant to section 12(b) of the Act:

 

        Name of each exchange
Title of each class   Trading Symbol(s)   on which registered
Common Stock, par value $0.01 per share   ESE   New York Stock Exchange

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨   Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b))

 

¨   Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.113d-4 (c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).            Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

  

 

 

 

Item 2.02 Results of Operations and Financial Condition

 

Today, November 14, 2024, ESCO Technologies Inc. (the Registrant, or the “Company”) is issuing a press release (furnished as Exhibit 99.1 to this report) announcing its financial and operating results for the fourth quarter and fiscal year ended September 30, 2024. See Item 7.01, Regulation FD Disclosure, below.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

 

Executive Officers – Long-Term Equity Incentive Awards

 

On November 7, 2024, the Human Resources and Compensation Committee of the Company’s Board of Directors approved the fiscal 2025 awards of time-based Restricted Share Units (RSUs) and Performance Share Units (PSUs) to the Company’s three executive officers and the other participants in the Company’s LTI program, effective November 7, 2024.

 

Other than the share amounts, the terms of the fiscal 2025 RSUs (and future RSUs except to the extent hereafter amended by the HRCC) are substantially similar to those awarded for fiscal 2024, vesting over a period of approximately three years, in three equal portions approximately 12, 24 and 36 months after the grant date; for the fiscal 2025 awards, vesting will occur on the last NYSE trading days in November 2025, 2026 and 2027.

 

The terms of the fiscal 2025 PSUs (and future PSUs except to the extent hereafter amended by the HRCC) are substantially similar to those awarded for fiscal 2024 other than the specific share amounts and performance goals. The fiscal 2025 PSUs will vest after a three-year performance period beginning October 1, 2024 and ending on September 30, 2027, on the last trading day of the month in which the HRCC approves and certifies the extent to which the applicable performance goals have been achieved. Upon vesting, the awards will be converted into a currently undeterminable number of shares of Company common stock, which may be less than or greater than the number of PSUs awarded, within certain specified threshold and maximum limits, depending on the degree to which the Company has achieved one or more specified performance goals. If the performance is less than the threshold goal for a particular performance measure, there will be no payout of that portion of the PSUs dependent on that measure.

 

The performance goals for the fiscal 2025 PSUs are specified Committee-approved targets for EBITDA (60%) and Return on Invested Capital (40%), with the resulting number of shares potentially subject to increase or decrease based on the Company’s Total Shareholder Return (TSR) over the performance period compared to the TSR of the companies in a peer group based on the S&P Small-Cap 600 Industrials Index (rTSR). If the Company’s rTSR is below the 25th percentile or above the 75th percentile, the resulting number of shares will be decreased by 20% or increased by 20%, respectively; if the Company’s rTSR is from the 25th percentile to the 75th percentile, no adjustment will be made.

 

The target number of shares in each RSU and PSU award equals the Committee-approved target values divided by the 15-day average trading price of the Company’s stock. The actual payout of the RSUs and PSUs will be in shares, whose value at the time of payout may be greater or less than the target values.

 

 

 

For the executive officers, the numbers of RSUs granted and the PSU threshold, target and maximum numbers of shares payable according to the performance criteria, were as follows:

 

Name and Title RSU
Target Values
as of
Grant Date
Number
of RSUs
Granted
PSU
Target Values
as of
Grant Date
PSU Payout Potential (Shares)
At Threshold
Performance
(50%
of Target)
At Target
Performance
At Maximum
Performance
(200% of
Target)
Bryan H. Sayler
Chief Executive Officer & President
$810,000 6,226 $1,890,000 7,263 14,526 29,052
Christopher L. Tucker
Senior Vice President
& Chief Financial Officer
$231,180 1,777 $539,420 2,073 4,146 8,292
David M. Schatz
Senior Vice President,
General Counsel & Secretary
$127,830 982 $298,270 1,146 2,292 4,584

 

Item 7.01 Regulation FD Disclosure

 

Today, November 14, 2024, the Company is issuing a press release (attached as Exhibit 99.1) announcing its financial and operating results for the fourth quarter and fiscal year ended September 30, 2024. The Company will conduct a related Webcast conference call today at 4:00 p.m. Central Time. The press release will be posted on the Company’s web site located at http://www.escotechnologies.com. It can be viewed through the “Investor News” page of the web site under the “Investor Center” tab, although the Company reserves the right to discontinue that availability at any time.

 

Item 9.01 Financial Statements and Exhibits

 

(d)       Exhibits

 

Exhibit No. Description of Exhibit
99.1 Press Release issued November 14, 2024
104 Cover Page Inline Interactive Data File

 

Other Matters

 

The information in this report furnished pursuant to Item 2.02 and Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (“Exchange Act”) or otherwise subject to the liabilities of that section, unless the Company incorporates it by reference into a filing under the Securities Act of 1933 as amended or the Exchange Act.

 

Any references to the Company’s web site address included in this Form 8-K and the press release are intended only as inactive textual references and not as active links to its web site. Information contained on the Company’s web site does not constitute part of this Form 8-K or the press release.

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 14, 2024

 

  ESCO TECHNOLOGIES INC.
   
  By: /s/David M. Schatz
    David M. Schatz
    Senior Vice President, General Counsel and Secretary

 

 

Exhibit 99.1

 



NEWS FROM
 

 

For more information contact:

Kate Lowrey - VP of Investor Relations

(314) 213-7277 / klowrey@escotechnologies.com

 

 

ESCO REPORTS FOURTH QUARTER AND FISCAL 2024 RESULTS

 

- Q4 Sales increase 9.5% to $299 Million

- Q4 GAAP EPS increase 6.5% to $1.32 -

- Q4 Adjusted EPS increase 16.8% to $1.46 -

 

- FY 2024 Sales increase 7.4% to $1.0 Billion -

- FY 2024 Entered Orders increase 9.7% to $1.1 Billion -

- FY 2024 GAAP EPS increase 10.1% to $3.94 -

- FY 2024 Adjusted EPS increase 13.0% to $4.18 -

 

ST. LOUIS, November 14, 2024 – ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the fourth quarter and fiscal year ended September 30, 2024 (Q4 2024 and FY 2024, respectively).

 

Operating Highlights

 

·Q4 2024 Sales increased $26 million (9.5 percent) to $299 million compared to $273 million in Q4 2023. Q4 organic sales increased $23 million (8.5 percent) and the MPE acquisition contributed $3 million (1.0 percent) of revenue in the quarter.

 

·FY 2024 Sales increased $71 million (7.4 percent) to $1.03 billion compared to $956 million in FY 2023. Organic sales increased $61 million (6.4 percent) and the MPE acquisition added $10 million (1.0 percent) of revenue growth for the full year.

 

·Q4 2024 GAAP EPS increased 6.5 percent to $1.32 per share compared to $1.24 per share in Q4 2023. Q4 2024 Adjusted EPS increased 16.8 percent to $1.46 per share compared to $1.25 per share in Q4 2023.

 

·FY 2024 GAAP EPS increased 10.1 percent to $3.94 per share compared to $3.58 per share in FY 2023. FY 2024 Adjusted EPS increased 13.0 percent to $4.18 per share compared to $3.70 per share in FY 2023.

 

·Q4 2024 Entered Orders decreased $51 million (14.9 percent) to $289 million (book-to-bill of 0.97x).

 

·FY 2024 Entered Orders increased $100 million (9.7 percent) to $1.1 billion (book-to-bill of 1.10x), resulting in record year-end backlog of $879 million.

 

 

 

·Net cash provided by operating activities was $72 million in Q4 2024 and $128 million for FY 2024 (an increase of $51 million compared to FY 2023).

 

Bryan Sayler, Chief Executive Officer and President, commented, “We finished the year strong with a solid Q4, highlighted by 9 percent sales growth, 130 basis points of Adjusted EBIT margin improvement, and a 17 percent increase in Adjusted EPS. It was great to see all three segments deliver sales growth and margin improvement in the quarter. We were also able to offset the impacts of profitability erosion on Space development programs at VACCO through outstanding performance across our other businesses. PTI and Crissair in particular delivered excellent results in the quarter.

 

“Overall, it was a great year as we delivered record financial performance and notably eclipsed the $1 billion mark on sales and orders. I would like to thank our entire team for their hard work and dedication in achieving these excellent results. We could not deliver multiple record years in a row without the strong and engaged teams that exist across the Company.

 

“As we enter 2025 there is a lot to be excited about across the company and we continue to see strong growth drivers in place across our core aerospace, Navy, and electric power end markets.”

 

Segment Performance

 

Aerospace & Defense (A&D)

 

·Q4 2024 sales increased $17 million (16.2 percent) to $124 million from $107 million in Q4 2023. FY 2024 sales increased $56 million (14.2 percent) to $448 million from $392 million in FY 2023. Sales growth in both the quarter and the year was driven by strength across Navy, commercial aerospace, and defense aerospace programs.

 

·Q4 2024 EBIT increased $4.7 million to $23.4 million from $18.7 million in Q4 2023. Adjusted EBIT increased $5.1 million in Q4 2024 to $24.2 million (19.4 percent margin) from $19.1 million (17.8 percent margin) in Q4 2023. FY 2024 EBIT increased $13.1 million to $84.7 million from $71.6 million in FY 2023. FY 2024 Adjusted EBIT increased $12.8 million to $85.9 million (19.2 percent margin) from $73.1 million (18.6 percent margin) in FY 2023. Leverage on higher volume and price increases more than offset margin erosion on certain space development contracts and inflationary pressures in both the quarter and the year.

 

·Q4 2024 entered orders decreased $47 million (26.7 percent) to $130 million (book-to-bill of 1.05). Orders were lower in the quarter due to the timing of large Navy orders in the prior year Q4 (machining of Virginia Class Block V hull treatments and ejection valves). FY 2024 entered orders increased $96 million (20.6 percent) to $564 million (book-to-bill of 1.26). Growth in the year was driven by defense and commercial aerospace and large Navy orders (Virginia Class Block V additional hull treatments and QARMS), resulting in record year-end backlog of $600 million.

 

 

 

Utility Solutions Group (USG)

 

·Q4 2024 sales increased $6 million (6.2 percent) to $108 million from $102 million in Q4 2023. Doble sales increased by $4.7 million (5.6 percent) and NRG sales increased by $1.7 million (8.6 percent). FY 2024 sales increased $27 million (7.8 percent) to $369 million from $342 million in FY 2023. Doble sales increased $19 million (6.8 percent) and NRG sales increased $8 million (12.2 percent) for the year. Sales growth in both the quarter and the year was driven by services and condition monitoring partially offset by lower protection testing at Doble and strong performance across our renewables product lines at NRG.

 

·Q4 2024 EBIT and Adjusted EBIT both increased $2.4 million to $28.6 million (26.4 percent margin) from $26.2 million (25.7 percent margin) in Q4 2023. FY 2024 EBIT increased $9.2 million to $85.9 million from $76.7 million in FY 2023. FY 2024 Adjusted EBIT also increased $9.2 million to $86.1 million (23.3 percent margin) from $76.9 million (22.5 percent margin) in FY 2023. Adjusted EBIT increases for the quarter and year were largely driven by leverage on higher volumes and price increases, partially offset by inflationary pressures.

 

·Q4 2024 entered orders increased $2 million (2.2 percent) to $100 million (book-to-bill of 0.92) as Doble orders decreased $5 million (5.4 percent) to $81 million and NRG orders increased $7 million (56.0 percent) to $19 million compared to the prior year quarter. FY 2024 entered orders increased $8 million (2.3 percent) to $356 million (book-to-bill of 0.96) resulting in year-end backlog of $120 million. For the year, Doble orders increased $11 million (3.9 percent) on increased electric utility spending and NRG orders decreased $3 million (4.3 percent) as the market moved beyond last year’s elevated activity related to the initial Inflation Reduction Act spending.

 

RF Test & Measurement (Test)

 

·Q4 2024 sales increased $2 million (3.6 percent) to $66 million from $64 million in Q4 2023. Organic sales were down slightly, but more than offset by $2.8 million of revenue related to the MPE acquisition which was completed in Q1 2024. FY 2024 sales decreased $12 million (5.3 percent) to $210 million. Test’s revenues were somewhat soft throughout the year related to lower wireless sales and weakness in China. However, the addition of MPE and strength in medical shielding and T&M projects for Aerospace and Defense customers helped drive a return to year-over-year growth in the back half of the year.

 

·Q4 2024 EBIT and Adjusted EBIT both increased $0.9 million to $12.0 million (18.3 percent margin) from $11.1 million (17.5 percent margin) in Q4 2023. Test’s record Q4 margin was driven by high-margin MPE content, cost reduction actions and price increases, partially offset by inflationary pressures. FY 2024 EBIT decreased $3.8 million to $28.6 million from $32.4 million in FY 2023. FY 2024 Adjusted EBIT decreased $3.3 million to $29.1 million (13.9 percent margin) from $32.4 million (14.6 percent margin) in FY 2023. For the year margin was impacted by lower sales of high-margin wireless and US filters volume and inflationary pressures, largely mitigated by price increases, cost reduction actions, and the addition of higher margin MPE content.

 

 

 

·Q4 2024 entered orders decreased $5.5 million (8.5 percent) to $59 million. The decrease was primarily related to a large utility shielding order that was booked in Q4 2023. FY 2024 entered orders decreased $4 million to $213 million (book-to-bill of 1.02) resulting in year-end backlog of $159 million. The decrease in orders for the year was primarily driven by lower wireless activity and delays on test and measurement projects in China.

 

SM&P Acquisition

 

As announced on July 8, 2024, ESCO has agreed to acquire the Signature Management & Power (SM&P) business of Ultra Maritime for a purchase price of $550 million. The closing of the transaction is subject to certain conditions, including the completion of the regulatory approval processes in the United States (US) and the United Kingdom (UK). The US closing conditions have been met. The UK government is currently assessing the transaction, and we are optimistic that the assessment will be positively resolved. Our current expectation would be to close the transaction in our second fiscal quarter. SM&P’s sole source product offerings will add significant scale to the ESCO Navy business, providing increased content on domestic Navy submarine and surface ship programs and expansion into vital UK and AUKUS navy platforms.

 

Business Outlook – 2025

 

Management expects growth in sales, Adjusted EBIT, and Adjusted EBITDA across each of the Company’s business segments in 2025. Our FY 2025 guidance excludes the impacts of:

 

·SM&P – the SM&P acquisition is expected to close in Q2 FY’25 and our guidance will be adjusted after the closing.

 

·Our ongoing strategic review of the Space business at VACCO.

 

Management’s expectations for growth in 2025 compared to 2024:

 

·Net sales are expected to grow 6 to 8 percent to a range of $1.09 to $1.11 billion on a consolidated basis, with A&D growing 7 to 9 percent, USG growing 7 to 9 percent, and Test growing 3 to 5 percent.

 

·Adjusted EBIT is expected to increase approximately 12 to 15 percent with Adjusted EBIT margins increasing to 15.3 to 15.7 percent of sales.

 

·Adjusted EBITDA is expected to increase approximately 10 to 13 percent with Adjusted EBITDA margins increasing to 20.5 to 21.0 percent of sales.

 

·The effective income tax rate is expected to be in the range of 23.0 to 23.5 percent in 2025.

 

 

 

·FY 2025 Adjusted EPS is expected to increase 12 to 17 percent to a range of $4.70 to $4.90 per share.

 

·Management expects Q1 2025 Adjusted EPS to increase 10 to 21 percent compared to the prior year first quarter and to be in the range of $0.68 - $0.75 per share. Consistent with prior years, revenues and Adjusted EPS are expected to grow sequentially throughout the year.

 

VACCO Space Business Strategic Review

 

The Company is in the process of conducting a strategic review of alternatives for the Space business at VACCO. The intent is to optimize ESCO’s portfolio of businesses and create value for ESCO shareholders. This decision was made as part of our continual strategic portfolio analysis, which is focused on positioning the Company to serve high-growth markets that have high-margin potential. As we conduct this review, we remain committed to executing on our current Space programs and serving the needs of our customers. VACCO operates two distinct product lines today, Space and Defense. As this review has evolved, our key consideration has become the feasibility of splitting these two businesses apart.

 

There is no deadline or definitive timetable for completion of the strategic alternatives review process and there can be no assurance that this process will result in the Company pursuing a transaction or any other strategic outcome. The Company does not intend to make any further public comment regarding the review of strategic alternatives for the Space business at VACCO until it has been completed or the Company determines that a disclosure is required or otherwise deemed appropriate.

 

Share Repurchase Program

 

The Company did not repurchase any shares of stock during Q4 2024. During FY 2024 the Company repurchased approximately 80,000 shares for $8 million.

 

Dividend Payment

 

The next quarterly cash dividend of $0.08 per share will be paid on January 17, 2025 to stockholders of record on January 2, 2025.

 

2025 Annual Meeting

 

The 2025 Annual Meeting of the Company’s shareholders will be held on February 4, 2025.

 

Conference Call

 

The Company will host a conference call today, November 14, at 4:00 p.m. Central Time, to discuss the Company’s Q4 2024 results. A live audio webcast and an accompanying slide presentation will be available in the Investor Center of ESCO’s website. Participants may also access the webcast using this registration link. For those unable to participate, a webcast replay will be available after the call in the Investor Center of ESCO’s website.

 

 

 

Forward-Looking Statements

 

Statements in this press release regarding Management’s intentions, expectations and guidance for fiscal 2025, including restructuring and cost reduction actions, sales, orders, revenues, margin, earnings, Adjusted EPS, and any other statements which are not strictly historical, are “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. securities laws.

 

Investors are cautioned that such statements are only predictions and speak only as of the date of this release, and the Company undertakes no duty to update them except as may be required by applicable laws or regulations. The Company’s actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment including but not limited to those described in Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and the following: the timing and outcome, if any, of the Company’s strategic alternatives review for the Space business at VACCO; of the Company’s pending acquisition of SM&P; the impacts of climate change and related regulation of greenhouse gases; the impacts of labor disputes, civil disorder, wars, elections, political changes, tariffs and trade disputes, terrorist activities, cyberattacks or natural disasters on the Company’s operations and those of the Company’s customers and suppliers; disruptions in manufacturing or delivery arrangements due to shortages or unavailability of materials or components or supply chain disruptions; inability to access work sites; the timing and content of future contract awards or customer orders; the timely appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties or data breaches; the availability of acquisitions; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; material changes in the cost of credit; changes in laws and regulations including but not limited to changes in accounting standards and taxation; changes in interest, inflation and employment rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration and performance of acquired businesses.

 

Non-GAAP Financial Measures

 

The financial measures EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are presented in this press release. The Company defines “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBIT” and “Adjusted EBITDA” as excluding the net impact of the items described in the attached Reconciliation of Non-GAAP Financial Measures, and “Adjusted EPS” as GAAP earnings per share excluding the net impact of the items described and reconciled in the attached Reconciliation of Non-GAAP Financial Measures.

 

 

 

EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes EBIT, Adjusted EBIT, EBITDA, and Adjusted EBITDA are useful in assessing the operational profitability of the Company’s business segments because they exclude interest, taxes, depreciation, and amortization, 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. The presentation of EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, and Adjusted EPS provides important supplemental information to investors by facilitating comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. The use of non-GAAP financial measures is not intended to replace any measures of performance determined in accordance with GAAP.

 

ESCO is a global provider of highly engineered products and solutions serving diverse end-markets. It manufactures filtration and fluid control products for the aviation, Navy, space, and process markets worldwide and composite-based products and solutions for Navy, defense, and industrial customers. ESCO is an industry leader in designing and manufacturing RF test and measurement products and systems; and provides diagnostic instruments, software and services to industrial power users and the electric utility and renewable energy industries. Headquartered in St. Louis, Missouri, ESCO and its subsidiaries have offices and manufacturing facilities worldwide. For more information on ESCO and its subsidiaries, visit the Company’s website at www.escotechnologies.com.

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

 (Dollars in thousands, except per share amounts)

 

   Three
Months
Ended
September 30,
2024
   Three
Months
Ended
September 30,
2023
 
Net Sales  $298,533    272,647 
Cost and Expenses:          
Cost of sales   178,808    164,424 
Selling, general and administrative expenses   59,995    56,555 
Amortization of intangible assets   8,219    7,930 
Interest expense   6,019    2,347 
Other expenses (income), net   1,450    199 
Total costs and expenses   254,491    231,455 
           
Earnings before income taxes   44,042    41,192 
Income tax expense   9,779    9,195 
           
Net earnings  $34,263    31,997 
           
Earnings Per Share (EPS)          
           
Diluted - GAAP  $1.32    1.24 
           
Diluted - As Adjusted Basis   $1.46 (1)    1.25 (2) 
           
Diluted average common shares O/S:   25,854    25,862 

 

(1)Q4 2024 Adjusted EPS excludes $0.14 per share of after-tax charges consisting primarily of $0.09 of debt financing and $0.03 of acquisition costs at Corporate related to the pending SM&P acquisition that was announced in July 2024, and $0.02 of restructuring charges (primarily severance) in the A&D segment.

 

(2)Q4 2023 Adjusted EPS excludes $0.01 per share of after-tax restructuring charges primarily at Westland (severance and asset write-off).

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

 

   Year Ended
September 30,
2024
   Year Ended
September 30,
 2023
 
Net Sales  $1,026,759    956,033 
Cost and Expenses:          
Cost of sales   622,741    580,377 
Selling, general and administrative expenses   224,015    217,110 
Amortization of intangible assets   32,804    28,953 
Interest expense   15,247    8,769 
Other expenses (income), net   2,063    1,877 
Total costs and expenses   896,870    837,086 
           
Earnings before income taxes   129,889    118,947 
Income tax expense   28,008    26,402 
           
Net earnings  $101,881    92,545 
           
Earnings Per Share (EPS)          
           
Diluted - GAAP  $3.94    3.58 
           
Diluted - As Adjusted Basis   $4.18(1)    3.70(2) 
           
Diluted average common shares O/S:   25,872    25,879 

 

(1)FY 24 Adjusted EPS excludes $0.24 per share of after-tax charges consisting primarily of $0.09 of debt financing and $0.06 of acquisition costs at Corporate related to the pending SM&P acquisition that was announced in July 2024; $0.05 of restructuring charges (primarily severance) in the A&D, Test and USG segments; and $0.04 of MPE acquisition backlog and inventory step-up charges.

 

(2)FY 23 Adjusted EPS excludes $0.12 per share of after-tax charges consisting of $0.06 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges, $0.03 of restructuring charges within the A&D segment and $0.01 of Corporate acquisition related costs.

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

 

 

   GAAP   As Adjusted 
   Q4 2024   Q4 2023   Q4 2024   Q4 2023 
Net  Sales                    
Aerospace & Defense  $124,291    107,009    124,291    107,009 
USG   108,491    102,148    108,491    102,148 
Test   65,751    63,490    65,751    63,490 
Totals  $298,533    272,647    298,533    272,647 
                     
EBIT                    
Aerospace & Defense  $23,351    18,647    24,170    19,075 
USG   28,563    26,179    28,593    26,242 
Test   12,015    11,115    12,015    11,115 
Corporate   (13,868)   (12,402)   (12,955)   (12,402)
Consolidated EBIT   50,061    43,539    51,823    44,030 
Less: Interest expense   (6,019)   (2,347)   (2,969)   (2,347)
Less: Income tax expense   (9,779)   (9,195)   (10,886)   (9,308)
Net earnings  $34,263    31,997    37,968    32,375 

 

Note 1: Adjusted net earnings of $38.0 million in Q4 2024 exclude $3.7 million (or $0.14 per share) of after-tax charges consisting primarily of $0.12 of debt financing and acquisition costs at Corporate related to the pending SM&P acquisition that was announced in July 2024 and $0.02 of restructuring charges (primarily severance) in the A&D segment.

 

Note 2: Adjusted net earnings of $32.4 million in Q4 2023 exclude $0.4 million (or $0.01 per share) of after-tax restructuring charges primarily at Westland (severance and asset write-off)

 

EBITDA Reconciliation to Net earnings:          Q4 2024   Q4 2023 
   Q4 2024   Q4 2023   As Adjusted   As Adjusted 
Consolidated EBITDA  $64,112    56,363    65,874    56,854 
Less: Depr & Amort   (14,051)   (12,824)   (14,051)   (12,824)
Consolidated EBIT   50,061    43,539    51,823    44,030 
Less: Interest expense   (6,019)   (2,347)   (2,969)   (2,347)
Less: Income tax expense   (9,779)   (9,195)   (10,886)   (9,308)
Net earnings  $34,263    31,997    37,968    32,375 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

 

   GAAP   As Adjusted 
   FY 2024   FY 2023   FY 2024   FY 2023 
Net  Sales                    
Aerospace & Defense  $448,175    392,443    448,175    392,443 
USG   369,061    342,320    369,061    342,320 
Test   209,523    221,270    209,523    221,270 
Totals  $1,026,759    956,033    1,026,759    956,033 
                     
EBIT                    
Aerospace & Defense  $84,747    71,643    85,917    73,070 
USG   85,918    76,722    86,143    76,915 
Test   28,629    32,395    29,110    32,395 
Corporate   (54,158)   (53,044)   (51,079)   (50,531)
Consolidated EBIT   145,136    127,716    150,091    131,849 
Less: Interest expense   (15,247)   (8,769)   (12,197)   (8,769)
Less: Income tax expense   (28,008)   (26,402)   (29,849)   (27,353)
Net earnings  $101,881    92,545    108,045    95,727 

 

Note 1: Adjusted net earnings of $108.0 million in FY 2024 exclude $6.2 million (or $0.24 per share) of after-tax charges consisting primarily of $0.15 of debt financing and acquisition costs at Corporate related to the pending SM&P acquisition that was announced in July 2024; $0.05 of restructuring charges (primarily severance) in the A&D, Test and USG segments; and $0.04 of MPE acquisition backlog and inventory step-up charges.

 

Note 2: Adjusted net earnings of $95.7 million in FY 2023 exclude $3.2 million (or $0.12 per share) of after-tax charges consisting of $0.06 of executive management transition costs at Corporate, $0.02 of CMT acquisition inventory step-up charges, $0.03 of restructuring charges within the A&D segment, and $0.01 of Corporate acquisition related costs.

 

EBITDA Reconciliation to Net earnings:          FY 2024   FY 2023 
   FY 2024   FY 2023   As Adjusted   As Adjusted 
Consolidated EBITDA  $200,545    178,239    204,664    182,372 
Less: Depr & Amort   (55,409)   (50,523)   (54,573)   (50,523)
Consolidated EBIT   145,136    127,716    150,091    131,849 
Less: Interest expense   (15,247)   (8,769)   (12,197)   (8,769)
Less: Income tax expense   (28,008)   (26,402)   (29,849)   (27,353)
Net earnings  $101,881    92,545    108,045    95,727 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (Unaudited)

(Dollars in thousands)

 

   September 30,
2024
   September 30,
2023
 
Assets          
Cash and cash equivalents  $65,963    41,866 
Accounts receivable, net   240,680    198,557 
Contract assets   130,534    138,633 
Inventories   209,164    184,067 
Other current assets   22,308    17,972 
Total current assets   668,649    581,095 
Property, plant and equipment, net   170,596    155,484 
Intangible assets, net   407,602    392,124 
Goodwill   539,899    503,177 
Operating lease assets   37,744    39,839 
Other assets   14,130    11,495 
   $1,838,620    1,683,214 
           
Liabilities and Shareholders' Equity          
Current maturities of long-term debt  $20,000    20,000 
Accounts payable   98,371    86,973 
Contract liabilities   124,845    112,277 
Other current liabilities   106,638    95,401 
Total current liabilities   349,854    314,651 
Deferred tax liabilities   75,333    75,531 
Non-current operating lease liabilities   34,810    36,554 
Other liabilities   39,273    43,336 
Long-term debt   102,000    82,000 
Shareholders' equity   1,237,350    1,131,142 
   $1,838,620    1,683,214 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

 

   Year Ended September 30,
2024
   Year Ended September 30,
2023
 
Cash flows from operating activities:          
Net earnings  $101,881    92,545 
Adjustments to reconcile net earnings to net cash provided by operating activities:          
Depreciation and amortization   55,409    50,523 
Stock compensation expense   8,599    8,910 
Changes in assets and liabilities   (29,385)   (68,821)
Effect of deferred taxes   (8,962)   (6,267)
Net cash provided by operating activities   127,542    76,890 
           
Cash flows from investing activities:          
Acquisition of business, net of cash acquired   (56,383)   (17,694)
Capital expenditures   (36,166)   (22,377)
Additions to capitalized software   (12,090)   (12,397)
Net cash used by investing activities   (104,639)   (52,468)
           
Cash flows from financing activities:          
Proceeds from long-term debt   217,000    103,000 
Principal payments on long-term debt and short-term borrowings   (197,000)   (154,000)
Dividends paid   (8,246)   (8,252)
Purchases of common stock into treasury   (7,998)   (12,401)
Debt issuance costs   (2,988)   (1,826)
Other   (1,541)   (4,851)
Net cash used by financing activities   (773)   (78,330)
           
Effect of exchange rate changes on cash and cash equivalents   1,967    (1,950)
           
Net increase (decrease) in cash and cash equivalents   24,097    (55,858)
Cash and cash equivalents, beginning of period   41,866    97,724 
Cash and cash equivalents, end of period  $65,963    41,866 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Other Selected Financial Data (Unaudited)

(Dollars in thousands)

 

Backlog And Entered Orders - Q4 2024  A&D   USG   Test   Total 
Beginning Backlog - 7/1/24  $594,742    128,890    165,027    888,659 
Entered Orders   129,931    99,544    59,368    288,843 
Sales   (124,291)   (108,491)   (65,751)   (298,533)
Ending Backlog - 9/30/24  $600,382    119,943    158,644    878,969 

 

Backlog And Entered Orders - FY 2024  A&D   USG   Test   Total 
Beginning Backlog - 10/1/23  $484,069    133,459    154,834    772,362 
Entered Orders   564,488    355,545    213,333    1,133,366 
Sales   (448,175)   (369,061)   (209,523)   (1,026,759)
Ending Backlog - 9/30/24  $600,382    119,943    158,644    878,969 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (Unaudited)

 

EPS – Adjusted Basis Reconciliation – Q4 2024     
EPS – GAAP Basis – Q4 2024  $1.32 
Adjustments (defined below)   0.14 
EPS – As Adjusted Basis – Q4 2024  $1.46 
      
Adjustments exclude $0.14 per share consisting of after-tax charges primarily of $0.09 of debt financing and $0.03 of acquisition costs at Corporate related to the pending SM&P acquisition, and $0.02 of restructuring charges (primarily severance) in the A&D segment. The $0.14 of EPS adjustments per share consists of $4.8 million of pre-tax charges offset by $1.1 million of tax benefit for net impact of $3.7 million.     
      
EPS – Adjusted Basis Reconciliation – FY 2024     
EPS – GAAP Basis – FY 2024  $3.94 
Adjustments (defined below)   0.24 
EPS – As Adjusted Basis – FY 2024  $4.18 
      
Adjustments exclude $0.24 per share of after-tax charges consisting primarily of $0.09 of debt financing and $0.06 of acquisition costs at Corporate related to the pending SM&P acquisition, $0.05 of restructuring charges (primarily severance) in the A&D, Test and USG segments, and $0.04 of MPE acquisition backlog and inventory step-up charges.     
      
The $0.24 of EPS adjustments per share consists of $8.0 million of pre-tax charges offset by $1.8 million of tax benefit for net impact of $6.2 million.      
      
EPS – Adjusted Basis Reconciliation – Q4 2023     
EPS – GAAP Basis – Q4 2023  $1.24 
Adjustments (defined below)   0.01 
EPS – As Adjusted Basis – Q4 2023  $1.25 
      
Adjustments exclude $0.01 per share consisting of after-tax restructuring charges primarily at Westland (severance and asset write-off).     
      
The $0.01 of EPS adjustments per share consists of $0.5 million of pre-tax charges offset by $0.1 million of tax benefit for net impact of $0.4 million.     
      
EPS – Adjusted Basis Reconciliation – FY 2023     
EPS – GAAP Basis – FY 2023  $3.58 
Adjustments (defined below)   0.12 
EPS – As Adjusted Basis – FY 2023  $3.70 
      
Adjustments exclude $0.12 per share of after-tax charges consisting of executive management transition costs at Corporate, CMT acquisition inventory step-up charges, restructuring charges within the A&D segment and Corporate acquisition related costs.     
      
The $0.12 of EPS adjustments per share consists of $4.1 million of pre-tax charges offset by $0.9 million of tax benefit for net impact of $3.2 million.