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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): August 9, 2005
ESCO TECHNOLOGIES INC.
(Exact Name of Registrant as Specified in Charter)
Missouri 1-10596 43-1554045
(State or Other (Commission (I.R.S. Employer
Jurisdiction of Incorporation) File Number) Identification No.)
8888 Ladue Road, Suite 200, St. Louis, Missouri 63124-2056
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 314-213-7200
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Today, August 9, 2005, the Registrant is issuing a press release (Exhibit 99.1
to this report) announcing its fiscal 2005 third quarter financial and operating
results and also the declaration by its Board of a two-for-one split of the
Registrant's common stock. See Item 7.01, Regulation FD Disclosure below.
ITEM 7.01. REGULATION FD DISCLOSURE
Today, the Registrant is issuing a press release announcing its fiscal 2005
third quarter financial and operating results and also the declaration by its
Board of a two-for-one split of the Registrant's common stock. This press
release is furnished herewith as Exhibit 99.1 and will be posted on the
Registrant's website located at http://www.escotechnologies.com. It can be
viewed through the "Investor Relations" page of the website under the tab "Press
Releases," although the Registrant reserves the right to discontinue that
availability at any time.
NON-GAAP FINANCIAL MEASURES
The press release furnished herewith contains financial measures and financial
terms not calculated in accordance with generally accepted accounting principles
in the United States of America ("GAAP") in order to provide investors and
management with an alternative method for assessing the Registrant's operating
results in a manner that is focused on the performance of the Registrant's
ongoing operations. The Registrant has provided definitions below for the
non-GAAP financial measures utilized in the press release, together with an
explanation of why management uses these measures, and why management believes
that these non-GAAP financial measures are useful to investors. The press
release uses the non-GAAP financial measures of "operational" net earnings,
earnings per share and results of operations, as well as "EBIT from continuing
operations," "EBIT margin," "operational" EBIT margin, "free cash flow from
continuing operations" and Filtration segment "operational" EBIT.
The Registrant defines "operational" net earnings, earnings per share, and
results of operations as net earnings, earnings per share, and results of
operations in accordance with GAAP, except for the exclusion of (i) exit costs
and severance charges related to the shutdown and relocation of the Filtration
segment Puerto Rico facility recorded in fiscal 2004, and (ii) the results of
operations from the MicroSep businesses which were divested in fiscal 2004 and
are shown as "discontinued operations" in fiscal 2004. The Registrant's
management uses these "operational" results in evaluating the measures of
continuing operations of the Registrant and believes that this information
provides investors with additional insight into the period over period financial
performance of the Registrant.
The Registrant defines "EBIT from continuing operations" as earnings from
continuing operations before interest and taxes. The Registrant defines "EBIT
margin" as EBIT from continuing operations as a percent of net sales. The
Registrant's management evaluates the performance of its operating segments
based on EBIT from continuing operations and EBIT margin, and believes that EBIT
from continuing operations and EBIT margin are useful to investors to
demonstrate the operational profitability of the Registrant's business segments
by excluding interest and taxes, which are generally accounted for across the
entire Registrant on a consolidated basis. EBIT from continuing operations is
also one of the measures used by management in determining resource allocations
within the Registrant and incentive compensation.
The Registrant defines "Free cash flow" from continuing operations as net cash
provided by operating activities from continuing operations less capital
expenditures from continuing operations. The Registrant's management believes
that free cash flow from continuing operations is useful to investors and
management as a supplemental financial measurement in the evaluation of the
Registrant's business and believes that free cash flow may provide additional
information with respect to the Registrant's ability to meet its future debt
service, capital expenditures and working capital requirements. Free cash flow
can also be reinvested in the Registrant for future growth.
The Registrant defines Filtration segment "operational" EBIT as segment EBIT,
excluding the costs related to the shutdown of the Puerto Rico facility.
The presentation of the information described above is intended to supplement
investor' understanding of the Registrant's operating performance. The
Registrant's non-GAAP financial measures may not be comparable to other
companies' non-GAAP financial performance measures. Furthermore, these measures
are not intended to replace net earnings, cash flows, financial position,
comprehensive income (loss), or any other measure as determined in accordance
with GAAP.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description of Exhibit
99.1 Press Release dated August 9, 2005
OTHER MATTERS
The information contained in this report, 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 Registrant incorporates it by reference into a filing
under the Securities Act of 1933 as amended or the Exchange Act.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESCO TECHNOLOGIES INC.
Dated: August 9, 2005 By: /s/G.E. Muenster
G.E. Muenster
Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Press release dated August 9, 2005
exhibit 99.1
NEWS FROM ESCO TECHNOLOGIES INC.
For more information contact: For media inquiries:
Patricia K. Moore David P. Garino
Director, Investor Relations (314) 982-0551
ESCO Technologies Inc.
(314) 213-7277
ESCO ANNOUNCES THIRD QUARTER RESULTS
AND A 2 FOR 1 STOCK SPLIT
St. Louis, MO, August 9, 2005 - ESCO Technologies Inc. (NYSE: ESE) today
announced its results for the fiscal 2005 third quarter ended June 30, 2005,
along with a 2 for 1 stock split.
Third Quarter Summary
Net earnings for the fiscal 2005 third quarter were $12.4 million, or $0.95
per share compared to net earnings of $12.0 million, or $0.90 per share in the
third quarter of fiscal 2004. The fiscal 2005 third quarter operating results
were impacted by:
o An effective tax rate of 15.7 percent, primarily resulting from the
true-up of the prior year estimated foreign sourced income. Absent this
adjustment, the fiscal 2005 third quarter effective tax rate would have been 33
percent, which is lower than the previously communicated estimated tax rate of
37.5 percent due to a significant increase in fiscal 2005 third quarter foreign
sourced income. The difference between the 15.7 percent actual tax rate and the
33 percent tax rate approximated $0.20 per share in the quarter. The specifics
of the tax rate are explained below in the "Effective Tax Rate" section of this
release.
o Approximately $1.6 million in sales, and $1.0 million of pretax earnings,
resulting from a termination and settlement of a supply agreement with a medical
device customer at Filtertek.
o Approximately $0.8 million of pretax charges related to the write-off of
certain patents and licenses resulting from Management's decision to abandon a
sensor development program at PTI. This write-off was recorded as an asset
impairment charge.
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Add One
o Approximately $0.8 million of additional Selling, General and
Administrative expenses (SG&A) incurred in the Communications segment
primarily relating to additional engineering, marketing and new
product development efforts being expended.
o Approximately $0.3 million of additional professional fees incurred
related to the implementation of Sarbanes-Oxley compliance.
The fiscal 2004 third quarter results included a net gain from
discontinued operations of $0.8 million, or $0.06 per share. Excluding the
effect of discontinued operations, prior year third quarter "Operational"
net earnings as defined in earlier releases were $11.2 million, or $0.84
per share.
Year-To-Date Summary
- --------------------
Net earnings for the first nine months of fiscal 2005 were $33.4 million,
or $2.54 per share compared to net earnings of $23.6 million, or $1.77 per share
for the first nine months of fiscal 2004. The fiscal 2005 year-to-date operating
results were impacted by:
O The fiscal 2005 third quarter effective tax rate of 15.7 percent.
o The fiscal 2005 third quarter termination and settlement of a supply
agreement with a medical device customer at Filtertek.
o The fiscal 2005 third quarter write-off of certain patents and
licenses related to the sensor development program at PTI.
o Approximately $3.6 million of additional Selling, General and
Administrative expenses (SG&A) incurred in the Communications segment
primarily relating to additional engineering, marketing and new
product development efforts being expended.
o Approximately $0.8 million of additional professional fees incurred
related to the implementation of Sarbanes-Oxley compliance.
The fiscal 2004 year-to-date results included a net loss from discontinued
operations of ($1.8) million, or ($0.14) per share, and the after-tax charges
related to the exit and shutdown of the Puerto Rican facility of ($1.0) million,
or ($0.08) per share. Excluding these items, prior year first nine months
"Operational" earnings as defined in earlier releases were $26.4 million, or
$1.98 per share.
A reconciliation of the fiscal 2004 GAAP reported earnings to "Operational"
earnings is included in the Exhibits attached to this release. The Company
believes that the presentation of fiscal 2004 "Operational" earnings provides
meaningful additional insight into the Company's performance.
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Add Two
Sales
-----
Fiscal 2005 third quarter sales were $108.8 million compared to third
quarter 2004 sales of $107.9 million. Fiscal 2005 year-to-date sales of $319.3
million were $12.8 million, or 4 percent higher than 2004 year-to-date sales of
$306.5 million. Favorable foreign currency values resulted in approximately $0.9
million and $3.2 million of the sales increases realized in the 2005 third
quarter and year-to-date periods, respectively.
On a segment basis for the fiscal 2005 third quarter, Communications sales
decreased 16 percent; Filtration / Fluid Flow ("Filtration") sales increased 2
percent; and Test sales increased 24 percent as compared to the prior year
period. Year-to-date, fiscal 2005 Communications sales increased 2 percent;
Filtration sales increased 3 percent; and Test sales increased 9 percent as
compared to the first nine months of fiscal 2004.
Communications segment sales decreased $6.1 million in the third quarter of
fiscal 2005 compared to the third quarter of fiscal 2004 as a result of the
following items: sales to Puerto Rico Electric Power Authority (PREPA) were $3.2
million lower in the current period; sales in the prior year third quarter
included deliveries to Bangor Hydro ($2.8 million) and Idaho Power ($1.9
million) which were not repeated in the current period; partially offset by
higher shipments of Comtrak's SecurVision video security products, which
generated $2.3 million in sales during the third quarter of 2005 versus $1.0
million of sales in the 2004 third quarter. DCSI's sales to electric utility
cooperative customers (COOP) were approximately $23 million in both the third
quarter of fiscal 2005 and 2004. The year-to-date sales increase of $1.8 million
includes an $11 million increase of SecurVision product deliveries ($12.9
million versus $1.9 million), offset by a reduction in sales to PPL Electric
Utilities Corporation (PPL) of $18.7 million ($1.9 million versus $20.6
million).
Filtration segment sales increased $0.7 million during the third quarter of
fiscal 2005 due to the following items: $1.6 million of sales resulting from the
above mentioned settlement and termination of a supply agreement for a medical
device customer at Filtertek; $1.1 million of additional shipments of commercial
and military aerospace products at PTI; partially offset by a $1.1 million
decrease in defense spares shipments at VACCO; and lower automotive shipments at
Filtertek. Year-to-date, Filtration segment sales increased primarily due to
$4.1 million of additional volume of commercial and military aerospace products
at PTI.
Test segment sales increased during the third quarter and year-to-date
periods of 2005 due to higher component sales, additional test chamber
installations, the completion of several government shielding projects, the
achievement of certain revenue milestones on the large Boeing contract, and
higher sales recorded at the Company's Asian operations. These increases
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- -
Add Three
were partially offset by a $3.3 million decrease in sales in the third quarter
of fiscal 2005, and a $6.4 million decrease in the year-to-date period of 2005
at the Company's European operations resulting from the fiscal 2004 completion
of two large test chamber installations.
Earnings Before Interest and Taxes (EBIT)
- -----------------------------------------
Although fiscal 2005 third quarter sales increased in total, the sales mix
changed reflecting decreased sales in Communications, which were replaced by
higher sales in the Test segment. As a result, fiscal 2005 third quarter EBIT
decreased by $3.8 million as compared to the fiscal 2004 third quarter.
On a segment basis, items that impacted EBIT dollars and EBIT as a percent
of sales ("EBIT margin") during the third quarter of fiscal 2005 included the
following.
In the Communications segment, EBIT for the 2005 third quarter was lower
than the prior year period the decreased sales volume of AMR products noted
above, and due to an $0.8 million increase in SG&A expenses relating to
additional engineering, marketing and new product development efforts being
expended to further differentiate DCSI's technology and enhance its competitive
position. EBIT for the year-to-date 2005 period was higher than prior year
primarily due to the additional profit associated with the increased sales
volume of SecurVision products.
In the Filtration segment, EBIT was lower during the 2005 third quarter
primarily due to an $0.8 million asset impairment charge related to the
abandonment of a sensor development program at PTI. The Company ended its
development efforts on this program after it determined that the market was not
developing as quickly as anticipated and the future costs and timeframe to fully
commercialize the product were not acceptable. Filtertek's current-year EBIT was
favorably impacted by $1.0 million in the third quarter and $1.9 million
year-to-date as a result of the termination of a supply agreement with a medical
device customer. This settlement was offset by $1 million reduction in EBIT
realized during the third quarter of 2005 at VACCO resulting from the decreased
sales of defense spares. The 2004 year-to-date EBIT in the Filtration segment
was negatively impacted by the exit and move costs incurred and the
inefficiencies being absorbed at Filtertek during the first six months of fiscal
2004 as a result of operating in both the Puerto Rico and Juarez facilities.
In the Test segment, EBIT dollars increased in the third quarter and
year-to-date periods of 2005 due to the additional sales volume and changes in
sales mix resulting from additional large chamber projects which carry lower
margins as compared to component products. In addition, EBIT was negatively
impacted in 2005 as a result of significantly higher installation costs incurred
during fiscal 2005 on government-shielding projects located in volatile areas of
the world, and higher costs of steel and copper.
The Corporate office operating expenses were slightly higher in the third
quarter of fiscal 2005 resulting from additional professional fees incurred
related to Sarbanes-Oxley requirements.
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Add Four
EBIT from continuing operations for the prior year periods was affected by
certain charges which are presented in detail in the financial Exhibits attached
at the end of this release.
For fiscal 2004 year-to-date, the pretax charges in continuing operations
related to these items were $1.3 million. These items are included in "Earnings
before income taxes" in the Exhibits.
Effective Tax Rate
- ------------------
During the third quarter of fiscal 2005, the Company had an effective tax
rate of 15.7 percent versus our previous expectations of 37.5 percent. The
decrease in the third quarter tax rate was primarily driven by: a true-up of the
estimated prior year foreign sourced income which was finalized during the
book-to-tax reconciliation generated in the course of filing the Corporate tax
return in June; an adjustment to the current year tax provision resulting from
higher foreign sourced pretax income (including the June 2005 settlement reached
with the medical device customer in Ireland); and a favorable state tax rate
adjustment. The majority of the rate adjustment resulted from DCSI pretax income
sourced in Puerto Rico. The fiscal 2005 third quarter tax rate, absent the
true-up of the prior year foreign sourced income, would have been approximately
33 percent.
New Orders
- ----------
New orders received were $106.2 million and $96.6 million in the third
quarter of fiscal 2005 and 2004, respectively, and $321.6 million and $291.7
million for the nine-month periods of fiscal 2005 and 2004, respectively,
resulting in a backlog of $251.4 million at June 30, 2005. New orders received
in the third quarter of fiscal 2005 compared to the third quarter of fiscal
2004, respectively, were: in Filtration, $39.2 million and $40.3 million; in
Communications, $37.4 million and $31.8 million; and in Test were $29.6 million
and $24.6 million.
Cash Flow
- ---------
The Company generated $9.3 million and $33.8 million of free cash flow
during the third quarter and year-to-date periods ended June 30, 2005,
respectively. Free cash flow is defined as "Net Cash Provided by Operating
Activities" less "Capital Expenditures." For a reconciliation of free cash flow,
see the Exhibits attached to this release.
Stock Split
- -----------
The Board of Directors declared a 2 for 1 split of the Company's stock to
be effected in the form of a 100 percent stock dividend payable September 23,
2005 to shareholders of record on September 9, 2005. The stock dividend will be
distributed by the Company's transfer agent, Registrar and Transfer Company.
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Add Five
Stock Repurchase Program
- ------------------------
No shares were repurchased during the third quarter of fiscal 2005. The
Company spent $24.9 million during the first quarter of fiscal 2005 to
repurchase 335,000 shares of its outstanding stock under its existing stock
repurchase program. As of June 30, 2005, approximately 575,000 shares remain
available for repurchase by the Company under the current program, which expires
September 30, 2006.
Chairman's Commentary
- ---------------------
Vic Richey, Chairman and Chief Executive Officer, commented,
"Operationally, our third quarter results were generally in line with our
expectations with the exception of the Communications segment where
approximately $1.2 million of expected sales and the associated profit shifted
from the third quarter to the fourth quarter. The clear highlight of the third
quarter was the progress we made in expanding our opportunities in the
Investor-Owned Utility (IOU) market. As previously announced, we received a
contract from TXU Electric Delivery (TXU) to cover an additional 265,000
endpoints, and we were selected by Pacific Gas and Electric Company (PG&E) as
the single solution for all of PG&E's electric customers as part of its proposed
Advanced Metering Infrastructure (AMI) project. We are under way on the TXU
program and it is our hope that the performance and economies we deliver through
our TWACS system will encourage TXU to further expand its deployment of our
product. In the case of the PG&E program, we are actively working with the
customer to finalize a contract. In addition to finalizing a contract, the
program is also subject to Regulatory and Board approvals. If we are successful
in advancing these two IOU projects, we should see significant incremental sales
and profit contributions beginning in the second half of fiscal 2006.
"In terms of the current market and operating environments for our
businesses, we are seeing a wide range of conditions.
"In Filtration, while the commercial aerospace market has improved, our
defense spares business is declining given the changing nature of activity in
the Middle East. The demand in the automotive markets we serve has been soft,
and taken together with higher raw material prices and our competitors' response
to the softness, we are in a challenging position in spite of the actions we
have taken to relocate our production to lower cost facilities. While we are not
without opportunities in Filtration, in the near term we expect continued market
pressure and a difficult operating environment.
"In Communications, we remain encouraged by the activity in the Automatic
Meter Reading (AMR) market. While we are seeing a somewhat higher level of
competition in the COOP space, I think we are well positioned to respond both in
terms of the functionality we
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Add Six
deliver and the opportunities we have to further reduce our costs. The IOU
markets remain active and the competitive landscape is unchanged. We are
continuing to increase our investments in the AMR business to expand our
presence through new or enhanced products and to service the increased volume we
anticipate.
"In the Test segment, the overall market remains strong and we continue to
regard Asia as our best opportunity for growth. The investments we have made in
both Japan and China are delivering results beyond what we initially expected.
In particular, during the third quarter we received a $4.2 million contract in
Japan from Mitsubishi Motors to provide a turnkey EMC test facility. Also in the
third quarter, we completed a state of the art shielded multi-purpose anechoic
chamber at the Telecommunications Metrology Center (TMC) in Beijing. The TMC is
the regulatory body responsible for all mobile and network equipment standards
development in China, and as such, we consider both our selection and the
chamber performance as significant in the context of further expanding our
business in China.
"Across our businesses, while we have pockets that are challenging, we
believe we have more opportunity than risk. The entire ESCO team is committed to
dealing with the challenges and is focused on capitalizing on the
opportunities."
Mr. Richey concluded, "As indicated in the headline of this release, the
Board of Directors today approved a split of the Company's stock. Our decision
to effect the split was based not only on our optimism about our long-term
outlook but also our belief that the split will both broaden our shareholder
base and enhance the marketability of our shares."
Fiscal 2005 Business Outlook
- ----------------------------
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.
Revenues
--------
Management expects the aggregate revenues to be up slightly for the fourth
quarter of fiscal 2005 compared to the third quarter of fiscal 2005 as presented
above. On a segment basis, Filtration revenues should be in the range of $40
million to $42 million, down from the third quarter of fiscal 2005 which
included the $1.6 million in revenue from the medical device settlement. Test
revenues should be in the range of $30 million to $32 million dependent upon the
timing of the completion of certain chamber projects in process. Communications
revenues are expected to increase in the fourth quarter and should be in the
range of $35 million to $37 million.
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Add Seven
EBIT
- ----
Management expects the aggregate EBIT to be up slightly for the fourth
quarter of fiscal 2005 compared to the third quarter of fiscal 2005. On a
segment basis, Filtration EBIT should be in the range of $4.5 million to $5.5
million, a decrease from the $5.9 million recorded in the third quarter of
fiscal 2005 which included the $1 million profit contribution from the medical
device settlement. Test EBIT should be in the range of $2.7 million to $3.2
million, and in Communications, EBIT should be in the range of $9.5 million to
$10.5 million.
Corporate operating expenses are expected to be slightly lower
than the third quarter fiscal 2005 amounts.
EBIT for the fourth quarter of fiscal 2005 is expected to be lower than the
fiscal 2004 fourth quarter primarily as a result of lower sales within the
Communications segment related to Bangor Hydro and PREPA, and lower sales of
defense spares products at Vacco.
Earnings Per Share
- ------------------
Management anticipates fourth quarter fiscal 2005 EPS to be in the range of
$0.75 to $0.78 per share. The resulting fiscal year EPS is expected to be $3.29
to $3.32 per share, which increased from our previous range of $3.10 to $3.20
per share, as a result of the lower effective tax rate for fiscal 2005.
As a result of the lower tax rate realized in the third quarter of fiscal
2005, the effective tax rate for the fourth quarter and full year of fiscal 2005
is expected to be approximately 37 percent and 32.5 percent, respectively,
compared to the previous expectation of 37.5 percent.
Other Matters
- -------------
At the end of August, ESCO will be relocating its corporate headquarters to
a nearby and smaller facility in St. Louis. The new location is expected to
reduce the Company's lease and operating expenses over the next several years.
Effective September 1, 2005, the new address will be 9900A Clayton Road,
St. Louis, Missouri, 63124. All telephone and fax numbers will remain the same.
Conference Call
- ---------------
The Company will host a conference call today, August 9, at 9:30 a.m.,
Central Time, to discuss the Company's third quarter operating results. A live
audio webcast will be available on the Company's Web site at
www.escotechnologies.com. Please access the Web site at least 15 minutes prior
to the call to register, download and install any necessary audio software.
A replay of the conference call will be available for seven days on the
Company's website noted above or by phone (dial 1-888-203-1112 and enter the
pass code 4889050).
Forward-Looking Statements
- --------------------------
Statements in this press release regarding future revenues and the level of
revenue contributions from each segment, potential customer contracts, further
deployment of our
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Add Eight
TWACS system by TXU, the Company's successful negotiation and receipt of a
contract with PG&E, growth in the AMR market, the success of cost reduction
efforts, fiscal 2005 corporate operating expenses, the fiscal 2005 effective tax
rate, future fiscal 2005 results, earnings, sales and profit contributions from
IOU projects, revenue growth, EBIT margins, EPS, long term success of the
Company, expected results of the stock split, and other written and 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: actions by the California Public Utility Commission or PG&E's Board
of Directors impacting PG&E's AMI projects; weakening of economic conditions in
served markets; changes in customer demands or customer insolvencies;
competition; intellectual property rights; technical difficulties; unforeseen
charges impacting corporate operating expenses; the performance of the Company's
international operations; successful execution of the planned sale of the
Company's Puerto Rico facility; material changes in the costs of certain raw
materials including steel, copper and petroleum based resins; delivery delays or
defaults by customers; termination for convenience of customer contracts; timing
and magnitude of future contract awards; performance issues with key customers,
suppliers and subcontractors; labor disputes; changes in laws and regulations
including changes in accounting standards and taxation requirements; changes in
foreign or U.S. business conditions affecting the distribution of foreign
earnings; costs relating to environmental matters; litigation uncertainty; and
the Company's successful execution of internal operating plans.
ESCO, headquartered in St. Louis, is a leading supplier of engineered
filtration products to the process, health care and transportation markets
worldwide. In addition, the Company markets proprietary, special purpose
communications systems and is the industry leader in RF shielding and EMC test
products.
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Add Nine
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
------------------
June 30, 2005
-------------
Net Sales $ 108,800
Cost and Expenses:
Cost of sales 71,911
Asset impairment 790
SG&A 21,722
Interest (income) expense (534)
Other (income) expenses, net 198
---
Total costs and expenses 94,087
------
Earnings before income taxes 14,713
Income taxes 2,312
-----
Net earnings $ 12,401
=========
Earnings per share:
Basic
Net earnings $ 0.98
=========
Diluted
Net earnings $ 0.95
=========
Average common shares O/S:
Basic 12,712
======
Diluted 13,094
======
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30, 2004
--------------------------------
(1)
GAAP Adj. "Operational"
---- ---- -------------
Net Sales $107,911 107,911
Cost and Expenses:
Cost of sales 70,125 70,125
SG&A 19,670 19,670
Interest (income) expense (129) (129)
Other (income) expenses, net 71 71
-- ---- --
Total costs and expenses 89,737 89,737
------ ---- ------
Earnings before income taxes 18,174 18,174
Income taxes 6,958 6,958
----- ---- -----
Net earnings from
continuing operations 11,216 11,216
Loss from discontinued
operations, net of tax (1,100) 1,100 (2) --
Gain on sale of discontinued
operations, net of tax 1,925 (1,925) (2) --
----- ------ --
Net earnings from
discontinued operations 825 (825) --
Net earnings $ 12,041 (825) 11,216
======== ==== ======
Earnings per share:
Basic
Net earnings from
continuing operations $ 0.87 0.87
Net earnings from
discontinued operations 0.06 0.00
---- ----
Net earnings $ 0.93 0.87
======== ====
Diluted
Net earnings from
continuing operations $ 0.84 0.84
Net earnings from
discontinued operations 0.06 0.00
---- ----
Net earnings $ 0.90 0.84
======== ====
Average common shares O/S:
Basic 12,938 12,938
====== ======
Diluted 13,315 13,315
====== ======
(1) Represents results on an adjusted basis, after removing the
item described below in (2).
(2) Relates to the Microfiltration and Separations businesses
which are classified as "discontinued operations."
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended
-----------------
June 30, 2005
-------------
Net Sales $ 319,335
Cost and Expenses:
Cost of sales 209,409
Asset impairment 790
SG&A 62,804
Interest (income) expense (1,317)
Other (income) expenses, net (492)
----
Total costs and expenses 271,194
-------
Earnings before income taxes 48,141
Income taxes 14,790
------
Net earnings $ 33,351
=========
Earnings per share:
Basic
Net earnings $ 2.62
=========
Diluted
Net earnings $ 2.54
=========
Average common shares O/S:
Basic 12,721
======
Diluted 13,113
======
- more -
Add Twelve
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended June 30, 2004
-------------------------------
(1)
GAAP Adj. "Operational"
---- ---- -------------
Net Sales $306,477 306,477
Cost and Expenses:
Cost of sales 207,175 207,175
SG&A 57,549 (470) (2) 57,079
Interest (income) expense (648) (648)
Other (income) expenses, net 1,199 (860) (3) 339
----- ---- ---
Total costs and expenses 265,275 (1,330) 263,945
------- ------ -------
Earnings before income taxes 41,202 1,330 42,532
Income taxes 15,833 305 (4) 16,138
------ --- ------
Net earnings from
continuing operations 25,369 1,025 26,394
Loss from discontinued
operations, net of tax (3,737) 3,737 (5) --
Gain on sale of discontinued
operations, net of tax 1,925 (1,925) (5) --
----- ------ --
Net loss from discontinued
operations (1,812) 1,812 --
Net earnings $ 23,557 2,837 26,394
======== ===== ======
Earnings (loss) per share:
Basic
Net earnings from
continuing operations $ 1.97 2.05
Net loss from
discontinued operations (0.14) 0.00
----- ----
Net earnings $ 1.83 2.05
======== ====
Diluted
Net earnings from
continuing operations $ 1.91 1.98
Net loss from
discontinued operations (0.14) 0.00
----- ----
Net earnings $ 1.77 1.98
======== ====
Average common shares O/S:
Basic 12,885 12,885
====== ======
Diluted 13,310 13,310
====== ======
(1) Represents results on an adjusted basis, after removing the
items described below in (2)-(4).
(2) Represents severance charges related to the exit of the Puerto
Rico facility.
(3) Represents shutdown costs related to the exit of the Puerto
Rico facility.
(4) Represents the tax impact of items described above in (2)-(3).
(5) Relates to the Microfiltration and Separations businesses
which are classified as "discontinued operations."
- more -
Add Thirteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in millions)
Three Months Ended Nine Months Ended
June 30, June 30,
-------- --------
2005 2004 2005 2004
---- ---- ---- ----
Net Sales-GAAP
Filtration $ 44.7 44.0 129.6 126.2
Communications 31.1 37.2 100.8 99.0
Test 33.0 26.7 88.9 81.3
---- ---- ---- ----
Totals $108.8 107.9 319.3 306.5
====== ===== ===== =====
EBIT-GAAP basis (1)
Filtration $ 5.9 6.4 18.0 14.1 (2)
Communications 8.2 11.7 28.4 26.3
Test 3.3 2.8 8.7 8.3
Corporate (3.2) (2.9) (8.3) (8.1)
---- ---- ---- ----
Totals $ 14.2 18.0 46.8 40.6
====== ==== ==== ====
Note: Prior year amounts presented above exclude the operations
of the MicroSep businesses, which are classified as
"discontinued operations." Depreciation and amortization
expense for continuing operations was $3.2 million and
$3.1 million for the fiscal quarters ended June 30, 2005
and 2004, respectively, and $9.3 million and $9.0 million
for the nine-month periods ended June 30, 2005 and 2004,
respectively.
(1) EBIT is defined as earnings from continuing operations before
interest and taxes.
(2) The reconciliation to Operational Revenue/EBIT for the Filtration
segment is below:
YTD FY 04
---------
Net Sales EBIT
--------- ----
Filtration Segment - GAAP $126.2 14.1
Add: Puerto Rico facility
exit costs -- 1.3
-- ---
Filtration Segment -
"Operational" $126.2 15.4
====== ====
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Add Fourteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(Dollars in millions)
EBIT (1) - As Reported
Three Months Ended Nine Months Ended
June 30, June 30,
-------- --------
2005 2004 2005 2004
---- ---- ---- ----
EBIT $14.2 18.0 46.8 41.9
Interest income 0.5 0.1 1.3 0.6
Less: Income taxes 2.3 6.9 14.8 16.1
--- --- ---- ----
Net earnings from
continuing operations $12.4 11.2 33.3 26.4
===== ==== ==== ====
(1) EBIT is defined as earnings from continuing operations before
interest and taxes. Excludes the operations of the MicroSep
businesses, which are classified as "discontinued operations"
in fiscal 2004.
- more -
Add Fifteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
June 30, September 30,
2005 2004
---- ----
Assets
- ------
Cash and cash equivalents $ 85,765 $ 72,281
Accounts receivable, net 71,045 77,729
Costs and estimated earnings
on long-term contracts 3,056 2,476
Inventories 53,881 44,287
Current portion of deferred
tax assets 20,022 27,810
Other current assets 9,184 8,947
----- -----
Total current assets 242,953 233,530
Property, plant and equipment, net 67,360 69,103
Goodwill 68,884 68,949
Deferred tax assets 6,529 10,055
Other assets 23,894 20,803
------ ------
$409,620 $402,440
======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Short-term borrowings and current
maturities of long-term debt $ 37 151
Other current liabilities 61,089 68,171
------ ------
Total current liabilities 61,126 68,322
Deferred income 3,288 2,738
Other liabilities 23,527 23,396
Long-term debt 360 368
Shareholders' equity 321,319 307,616
------- -------
$409,620 $402,440
======== ========
- more -
Add Sixteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Nine Months Ended
June 30, 2005
-------------
Cash flows from operating activities:
Net earnings $ 33,351
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 9,263
Changes in operating working capital (3,020)
Effect of deferred taxes 3,526
Other (2,689)
------
Net cash provided by operating activities 40,431
Cash flows from investing activities:
Capital expenditures (6,580)
------
Net cash used by investing activities (6,580)
------
Cash flows from financing activities:
Principal payments on long-term debt (122)
Purchases of common stock into treasury (24,928)
Other, including exercise of stock options 4,683
-----
Net cash used by financing activities (20,367)
--------
Net increase in cash and cash equivalents 13,484
Cash and cash equivalents, beginning of period 72,281
------
Cash and cash equivalents, end of period $ 85,765
========
- more -
Add Seventeen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Free Cash Flow - June 30, 2005
(Dollars in thousands)
Three Months Nine Months
Ended June 30, Ended June 30,
2005 2005
---- ----
Net cash provided by
operating activities $ 11,323 40,431
Less: Capital expenditures (2,012) ( 6,580)
------ - -----
Free cash flow $ 9,311 33,851
======== ======
- more -
Add Eighteen
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered
- -------------------
Orders-Q3 FY 2005 Filtration Comm. Test Total
- ----------------- ---------- ----- ---- -----
Beginning Backlog-
3/31/05 $ 92,523 101,706 59,716 253,945
Entered Orders 39,198 37,402 29,609 106,209
Sales (44,652) (31,141) (33,007) (108,800)
------- ------- ------- --------
Ending Backlog-
6/30/05 $ 87,069 107,967 56,318 251,354
========= ======= ====== =======
Backlog And Entered
- -------------------
Orders-YTD FY 2005 Filtration Comm. Test Total
- ------------------ ---------- ----- ---- -----
Beginning Backlog-
9/30/04 $ 77,753 108,661 62,664 249,078
Entered Orders 138,947 100,065 82,599 321,611
Sales (129,631) (100,759) (88,945) (319,335)
-------- -------- ------- --------
Ending Backlog-
6/30/05 $ 87,069 107,967 56,318 251,354
========= ======= ====== =======
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