ESCO Announces Second Quarter Results
SALES UP 15 PERCENT / EPS UP 60 PERCENT
Within this release, references to "quarters" and "year-to-date" relate to
the fiscal quarters and six-month periods ended
Net earnings and EPS are presented from "Continuing Operations" and
"Discontinued Operations." Continuing Operations represent the results of the
ongoing businesses of the Company. Discontinued Operations represent the
results of
Second Quarter 2009 vs. 2008 Highlights - Continuing Operations
- Net sales increased 14.7 percent to
$154.2 million . - EBIT dollars increased 34.5 percent to
$18.4 million . - EBIT as a percentage of sales increased to 11.9 percent from 10.2 percent.
- EPS increased 60 percent to
$0.40 per share from$0.25 per share. - Net debt outstanding was
$181.7 million atMarch 31, 2009 reflecting a leverage ratio of 1.99x, well below the credit facility covenant of 3.5x. - Entered orders were
$156.7 million with a book-to-bill ratio of 102 percent. - Firm orders of Aclara RF AMI products with
PG&E gas were approximately$25 million (bringing total gas product orders to over 3 million units to date) and with New York City Water were approximately$16 million .
Chairman's Commentary
"Through regular and detailed planning meetings with our Management teams, we continue to maintain a high degree of visibility and confidence surrounding the balance of the fiscal year. But given the uncertainties of today's macro environment, we are taking a more conservative posture as we address our expected outlook for 2009. As a result of the current cycle, we are adjusting our total year expectations to reflect a modest level of uncertainty, which I would characterize as a reflection of our conservative planning approach.
"In spite of today's economy, we continue to see meaningful opportunities developing across the businesses which we believe can help shield our downside risks. To help weather this storm, we will adhere to our strict cost management disciplines as we work our way through this cycle and demonstrate our resiliency.
"While aggressively managing our operating costs, we will maintain our focus on creating significant growth opportunities. To ensure future growth, we have maintained our R&D and engineering expenditures, primarily directed toward new product development initiatives in the AMI and Smart Grid area, along with a significant amount of new Space program opportunities. I am confident that our new products currently being introduced will position us well for the future.
"In closing, we are making meaningful progress at
Sales
For 2009, sales increased 14.7 percent during the second quarter and 11.8
percent for the first six months compared to the same periods of 2008. As
noted in earlier releases, the prior year sales amount included
Test sales in 2009 increased slightly in the second quarter and are up 5.6 percent YTD, primarily due to an increase in large chamber deliveries to the international wireless and electronics end-markets.
Filtration sales in 2009 decreased slightly in the second quarter and YTD as sales increases in the defense aerospace and space product lines were offset by lower commercial aerospace product deliveries.
Earnings Before Interest and Taxes (EBIT)
On a segment basis, items that impacted EBIT dollars and EBIT as a percent of sales ("EBIT margin") during the second quarter and YTD periods of fiscal 2009 included the following:
In the USG segment, EBIT for the 2009 second quarter was
In the Test segment, EBIT dollars and EBIT margins were significantly higher in 2009 due to the sales increases in 2009, favorable changes in sales mix, and rigorous cost controls.
In the Filtration segment, EBIT dollars and EBIT margins decreased in 2009 due to lower sales of high margin commercial aerospace products, an increase in research and development costs, and higher bid and proposal costs incurred related to the pursuit of a significant number of Space related projects.
Corporate operating costs were higher in 2009 due to higher amortization expenses related to recent acquisitions that included identifiable intangible assets.
Effective Tax Rate
The effective tax rate from Continuing Operations in the second quarter of
2009 was 36.1 percent compared to 37.4 percent in the second quarter of 2008.
The 2009 second quarter tax rate was consistent with the Company's guidance
provided in
New Orders
New orders received were
Orders from
Cumulative orders-to-date for the
Business Outlook - 2009
Statements contained in the preceding and following paragraphs are based on current expectations. Statements that are not strictly historical are considered forward-looking, and actual results may differ materially.
The Business Outlook described below excludes the impact of any future acquisitions or divestitures, and reflects the impact of the amortization of identifiable intangible purchase accounting assets related to Aclara Software, Aclara RF, Doble and LDIC; the impact of the Doble inventory step-up resulting in "lost" profit; and the amortization of TWACS NG(TM) software.
Aclara RF Facility Relocation
Due to its significant sales growth,
As previously disclosed, Management had planned to exit this business, and
during
Revenues and Earnings Per Share - 2009
Based on Management's current expectations along with the sale of Comtrak, the Company is revising its outlook for fiscal 2009 as follows:
- Revenues of approximately
$650 million ; - EPS - GAAP Basis of between
$1.90 and$2.00 (including$0.05 per share of expenses related to the Aclara RF facility relocation charge noted above); and, - EPS - Adjusted Basis of between
$2.32 and$2.42 per share.
EPS - Adjusted Basis excludes approximately
Management believes using "EPS - Adjusted Basis" as a financial measure is important for investors to understand the Company's operations and its ability to service its debt. The full-year 2009 tax rate is expected to be approximately 35 percent, with quarterly variations depending on the timing and amount of discrete tax benefits and charges.
Chairman's Commentary - Wrap-Up
Mr. Richey further commented, "As noted above, I remain cautiously
optimistic about the balance of fiscal 2009. Through rigorous management
oversight and a disciplined planning process, I am confident that we have
sufficient opportunities and the appropriate contingencies in place to allow
us to execute our current plan and achieve the operating results within our
range of expectations. Having Doble for the full year and beginning our AMI
deployments with
Conference Call
The Company will host a conference call today,
Forward-Looking Statements
Statements in this press release regarding the amounts and timing of
fiscal 2009 future revenues, results, earnings, EBIT, EPS - Adjusted Basis,
EPS - GAAP Basis, sales growth, orders, growth opportunities, success of new
products and technologies, costs incurred with the Aclara RF relocation and
new building, the fiscal 2009 effective annual tax rate, the timing and
certainty of utility customer spending, the long-term success of the Company,
and any other written or oral statements which are not strictly historical are
"forward-looking" statements within the meaning of the safe harbor provisions
of the federal securities laws. Investors are cautioned that such statements
are only predictions and speak only as of the date of this release, and the
Company undertakes no duty to update. The Company's actual results in the
future may differ materially from those projected in the forward-looking
statements due to risks and uncertainties that exist in the Company's
operations and business environment including, but not limited to: the risk
factors described in Item 1A of the Company's Annual Report on Form 10-K for
the fiscal year ended
ESCO, headquartered in
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Three Months
Ended Ended
March 31, 2009 March 31, 2008
-------------- --------------
Net Sales $154,156 134,400
Cost and Expenses:
Cost of sales 92,226 77,889
SG&A 38,237 38,535
Amortization of intangible assets 4,985 4,467
Interest expense 1,756 3,172
Other expenses (income), net 357 (136)
--- ----
Total costs and expenses 137,561 123,927
------- -------
Earnings before income taxes 16,595 10,473
Income taxes 5,990 3,912
----- -----
Net earnings from continuing operations 10,605 6,561
Loss from discontinued operations, net of tax
benefit of $101 and $292, respectively (177) (479)
Loss on sale from discontinued operations, net
of tax benefit of $905 (32) -
--- ---
Net earnings from discontinued operations (209) (479)
Net earnings $10,396 6,082
======= =====
Earnings per share:
Basic
Continuing operations 0.41 0.25
Discontinued operations (0.01) (0.01)
----- -----
Net earnings $0.40 0.24
===== ====
Diluted
Continuing operations 0.40 0.25
Discontinued operations (0.01) (0.02)
----- -----
Net earnings $0.39 0.23
===== ====
Average common shares O/S:
Basic 26,177 25,847
====== ======
Diluted 26,470 26,250
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Six Months Six Months
Ended Ended
March 31, 2009 March 31, 2008
-------------- --------------
Net Sales $301,513 269,672
Cost and Expenses:
Cost of sales 184,842 162,071
SG&A 77,519 70,986
Amortization of intangible assets 9,587 7,933
Interest expense 4,374 4,529
Other expenses (income), net 244 (350)
--- ----
Total costs and expenses 276,566 245,169
------- -------
Earnings before income taxes 24,947 24,503
Income taxes 8,502 9,208
----- -----
Net earnings from continuing operations 16,445 15,295
Loss from discontinued operations, net of tax of
$112 and $1,125, respectively (197) (1,423)
Loss on sale from discontinued operations, net
of tax of $905 and $4,809, respectively (32) (4,974)
--- ------
Net earnings from discontinued operations (229) (6,397)
Net earnings $16,216 8,898
======= =====
Earnings per share:
Basic
Continuing operations 0.63 0.59
Discontinued operations (0.01) (0.25)
----- -----
Net earnings $0.62 0.34
===== ====
Diluted
Continuing operations 0.62 0.58
Discontinued operations (0.01) (0.24)
----- -----
Net earnings $0.61 0.34
===== ====
Average common shares O/S:
Basic 26,143 25,803
====== ======
Diluted 26,444 26,227
====== ======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
March 31, March 31,
2009 2008 2009 2008
---- ---- ---- ----
Net Sales
-----------
Utility Solutions
Group $94,065 73,812 182,266 153,436
Test 33,713 33,496 69,202 65,561
Filtration 26,378 27,092 50,045 50,675
------ ------ ------ ------
Totals $154,156 134,400 301,513 269,672
======== ======= ======= =======
EBIT
-----
Utility Solutions
Group $16,138 11,222 26,693 25,965
Test 3,748 2,742 6,982 4,732
Filtration 4,227 4,913 7,090 8,562
Corporate (5,762) (1) (5,232) (2) (11,444) (3) (10,227) (4)
------ ------ ------- -------
Consolidated EBIT 18,351 13,645 29,321 29,032
Less: Interest
expense (1,756) (3,172) (4,374) (4,529)
------ ------ ------ ------
Earnings before
income taxes $16,595 10,473 24,947 24,503
======= ====== ====== ======
Note: Depreciation and amortization expense was $7.2 million and $6.9
million for the quarters ended March 31, 2009 and 2008,
respectively, and $15.1 million and $12.4 million for the six-month
periods ended March 31, 2009 and 2008, respectively.
(1) Includes $1.2 million of amortization of acquired intangible assets.
(2) Includes $1.1 million of amortization of acquired intangible assets.
(3) Includes $2.4 million of amortization of acquired intangible assets.
(4) Includes $1.9 million of amortization of acquired intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(unaudited)
EPS - Adjusted Basis Reconciliation - FY 2009
---------------------------------------------
EPS - GAAP Basis - FY 2009 Range $1.90 2.00
Adjustments (defined below) 0.42 0.42
---- ----
EPS - Adjusted Basis - FY 2009 Range $2.32 2.42
===== ====
Adjustments exclude pre-tax intangible asset amortization expense
related to TWACS NG software, purchase accounting intangible amortization
related to the Company's acquisitions within the last three years and, the
expense related to the purchase accounting step-up of Doble Engineering
Company inventory.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
March 31, September 30,
2009 2008
---- ----
Assets
------
Cash and cash equivalents $26,600 28,667
Accounts receivable, net 121,156 134,710
Costs and estimated earnings on
long-term contracts 4,239 9,095
Inventories 81,868 65,019
Current portion of deferred tax assets 14,540 15,368
Other current assets 17,215 14,888
Current assets from discontinued operations - 2,889
--- -----
Total current assets 265,618 270,636
Property, plant and equipment, net 69,774 72,353
Goodwill 329,659 328,878
Intangible assets, net 227,690 236,192
Other assets 17,565 17,665
Other assets from discontinued operations - 2,349
--- -----
$910,306 928,073
======== =======
Liabilities and Shareholders' Equity
------------------------------------
Short-term borrowings and current maturities
of long-term debt $50,000 50,000
Accounts payable 43,768 48,982
Current portion of deferred revenue 18,386 18,226
Other current liabilities 44,531 49,934
Current liabilities from discontinued
operations - 1,541
--- -----
Total current liabilities 156,685 168,683
Long-term portion of deferred revenue 2,087 2,228
Deferred tax liabilities 83,167 83,515
Other liabilities 20,242 21,760
Long-term debt 165,504 183,650
Shareholders' equity 482,621 468,237
------- -------
$910,306 928,073
======== =======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended
March 31, 2009
--------------
Cash flows from operating activities:
Net earnings $16,216
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net loss from discontinued operations 229
Depreciation and amortization 15,108
Stock compensation expense 2,097
Changes in operating working capital (11,413)
Effect of deferred taxes (1,074)
Other (1,242)
------
Net cash provided by operating activities -
continuing operations 19,921
Net loss from discontinued operations,
net of tax (229)
Net cash provided by discontinued operations 39
---
Net cash used by operating activities -
discontinued operations (190)
----
Net cash provided by operating activities 19,731
------
Cash flows from investing activities:
Additions to capitalized software (2,487)
Capital expenditures - continuing operations (3,116)
------
Net cash used by investing activities -
continuing operations (5,603)
Proceeds from divestiture of business, net -
discontinued operations 3,100
-----
Net cash used by investing activities (2,503)
------
Cash flows from financing activities:
Proceeds from long-term debt 27,000
Principal payments on long-term debt (45,146)
Excess tax benefit from stock options exercised 782
Proceeds from exercise of stock options 1,164
Other (190)
----
Net cash used by financing activities (16,390)
-------
Effect of exchange rate changes on cash and cash equivalents (2,905)
------
Net decrease in cash and cash equivalents (2,067)
Cash and cash equivalents, beginning of period 28,667
------
Cash and cash equivalents, end of period $26,600
=======
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered
Orders - Q2 FY 2009 Utility Solutions Test Filtration Total
-------------------- ----------------- ---- ---------- -----
Beginning Backlog -
12/31/08 continuing
opers $121,554 64,236 72,506 258,296
Entered Orders 97,247 26,024 33,413 156,684
Sales (94,065) (33,713) (26,378) (154,156)
------- ------- ------- --------
Ending Backlog -
3/31/09 $124,736 56,547 79,541 260,824
======== ====== ====== =======
Backlog And Entered
Orders - YTD Q2
FY 2009 Utility Solutions Test Filtration Total
-------- ----------------- ---- ---------- -----
Beginning Backlog -
9/30/08 continuing
opers $124,847 69,823 71,463 266,133
Entered Orders 182,155 55,926 58,123 296,204
Sales (182,266) (69,202) (50,045) (301,513)
-------- ------- ------- --------
Ending Backlog -
3/31/09 $124,736 56,547 79,541 260,824
======== ====== ====== =======
SOURCE
Director, Investor Relations of
+1-314-213-7277;
or media inquiries,
David P. Garino,
+1-314-982-0551,
for
Web Site: http://www.escotechnologies.com
(ESE)
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