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 18, 2004
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 7.01. REGULATION FD DISCLOSURE
The Registrant intends to make company presentations today, November 18,
2004, and to include the presentation charts on its website. The related press
release and the information that will be included on the Registrant's website
are attached as Exhibits 99.1 and 99.2 to this Form 8-K. This information
updates previous company presentations, and includes the Registrant's new
five-year financial objectives, a summary of the Registrant's strategy, and an
overview of each of the Registrant's three business segments.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit No. Description of Exhibit
99.1 Press release dated November 18, 2004.
99.2 Information included on Registrant's website as of
November 18, 2004.
The furnishing of these Exhibits is not intended to constitute a
representation that such furnishing is required by Regulation FD or that the
information they contain includes material investor information that is not
otherwise publicly available. Statements in Exhibits 99.1 and 99.2 that 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 November 18,
2004. The Registrant does not assume any obligation to update such information
in the future. The Registrant'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 Registrant's operations and business
environment including, but not limited to: weakening of economic conditions in
served markets; changes in customer demands or customer insolvencies;
competition; intellectual property rights; technical difficulties; the
availability of selected acquisitions; the timing, pricing, and availability of
shares offered for sale; unforeseen charges impacting corporate operating
expenses; the performance of the Registrant's international operations;
successful execution of the planned sale of the Registrant's Puerto Rico
facility; delivery delays or defaults by customers; termination for convenience
of customer contracts; timing and magnitude of future contract awards;
performance issues with key suppliers and subcontractors; collective bargaining
and 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 Registrant's
successful execution of internal operating plans.
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: November 18, 2004 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 November 18, 2004.
99.2 Information included on Registrant's website as of
November 18, 2004.
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 TO POST UPDATED PRESENTATION ON WEB SITE
St. Louis, MO, November 18, 2004 - ESCO Technologies Inc. (NYSE: ESE)
announced it will post today an updated Company presentation on its Web site,
www.escotechnologies.com.
The presentation includes the Company's new five-year financial objectives
and an overview of each of its three business segments.
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.
# # #
NYSE Symbol: ESE
November 2004
Forward-Looking Statement
2
Statements regarding future events, the development of new products, future growth drivers,
increases in shareholder value, future IOU contracts, the success of future acquisitions efforts, the
Company’s future results, including sales growth, EBIT, EBIT Margin, EPS estimates and
projections about the Company’s performance and other statements contained herein which are
not strictly historical are considered “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 November 18, 2004 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: weakening of economic conditions in served
markets; changes in customer demands or customer insolvencies; competition; the availability of
select acquisitions on acceptable terms; intellectual property rights; the success and timing of real
estate sales; technical difficulties; delivery delays or defaults by customers; termination for
convenience of customer contracts; timing and magnitude of future contract awards; performance
issues with key suppliers and subcontractors; collective bargaining and 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.
Today ESCO is…
A Proven Supplier of Special Purpose
Communications Systems Primarily for the
Electric Utility Industry
A Leading Provider of Engineered Filtration
Products
to the Health Care, Aerospace and
Automotive Markets Worldwide
The Industry Leader in RF Shielding and EMC
Test
Products
Spun-off in 1990 from Emerson
3
ESCO Products & Applications
Test
Filtration
Communications
4
ESCO Business Profile - FY 2003 vs 2004
$90.3M
23%
$164.1M
41%
$142.3M
36%
Fiscal 2003 Sales
= $396.7M
$137.8M
33%
$173.9M
41%
$110.4M
26%
Fiscal 2004 Sales
= $422.1M
5
Communications
Filtration
RF Shielding & Test
ESCO Served Markets - FY 2004
Advanced Metering
31%
Health Care
15%
Defense Aerospace
14%
Electronics
11%
Commercial
Aerospace
7%
Automotive Products
11%
Consumer & Appliance
8%
Video Security
1%
Industrial
2%
6
ESCO Strategy
7
ESCO will increase Shareholder Value through
Continued Investment in New Products
Selective Acquisitions
Ongoing Performance Improvement Actions
Supported by
A Strong Balance Sheet – AND –
Management Team whose Interests are
Strongly Aligned with the Shareholders
Financial Goals
Sales
$422
~
$700
EBIT Margin - Operational
14.5%
18%
EPS - Operational
$2.91
~
$6.00
See the reconciliation of EBIT as a Non-GAAP Financial Measure in Appendix A
"Operational" excludes MicroSep (i.e. Disc Ops) and $1.3M of Puerto
Rico exit and severance charges.
Base Period
'04
Goal
'09
8
ESCO 5 Year View
Sales Growth
> 10% CAGR
EBIT Margin
> 18%
EPS Growth
> 15% CAGR
FY 2004 Income Statements
Depreciation &
Amortization -
$11.9M
“Operational” excludes MicroSep (i.e. Disc Ops) and $1.3M of Puerto Rico exit and severance charges.
GAAP
“Operational“
Net Sales
422.1
$
422.1
$
EBIT
59.7
61.0
% of Sales
14.1%
14.5%
Net Earnings from
37.8
38.8
Continuing Operations
Net Loss from Discontinued
(2.1)
-
Operations, net after tax
Net Earnings (Loss)
35.7
38.8
EPS - Dilutive
Continuing Operations
2.84
2.91
Discountinued Operations
(0.16)
-
Net Earnings (Loss)
2.68
2.91
9
Excludes MicroSep and $1.3M of Puerto Rico charges.
FY 2004 Segment Performance
Net
EBIT
Sales
EBIT
Margin
Comm
$
137.8
$
38.4
27.9%
Filtration
173.9
23.1
13.3%
Test
110.4
11.3
10.2%
Other
-
(11.8)
-
Totals
$
422.1
$
61.0
14.5%
10
FY 2004 Entered Orders and Backlog
Comm
Filtration
Test
Consol
Beginning Backlog
130.4
$
86.2
$
46.4
$
263.0
$
+
Entered Orders
116.0
165.4
126.8
408.2
$
-
Sales
137.8
173.9
110.4
422.1
$
Ending Backlog
108.6
$
77.7
$
62.8
$
249.1
$
11
Includes $21.6M of Sales to PPL
Expenditures on new product
development and engineering
are typically 7-8% of sales
New antennas for measuring
EMC in frequency spectrum over 1GHz
Needleless access devices
Remote Disconnect
Switch Interbase (DSI) option on TWACS
Investments in New Products and Technologies
®
12
ESCO Acquisitions
13
Acquisition Characteristics:
$5M to $50M in Sales
Existing Segments
Competitors or Line Extensions
Drop-in or Core Technology Expansion
Focus
Communications
Direct access to the water and gas markets
Filtration and Test
Extend product offering
Key Element of ESCO Culture
Esco Performance Improvement Actions
14
Recent Initiatives
MicroSep Divestiture
P.R. Plant – 110,000 sq. ft. reduction, Relocation
to Juarez Mexico (Filtertek)
European Test Consolidation
Balance Sheet
Includes Tax
Effected NOL of
$26.4M, retained
from former
defense
subsidiaries.
FREE CASH FLOW
SEE THE RECONCILIATION OF NON-GAAP FINANCIAL MEASURES IN APPENDIX A
$44.6
CONTINUING OPS
9/30/2004
72.3
$
Accounts Receivable
77.7
Inventory
46.8
Other Current Assets
36.7
Total Current Assets
233.5
$
Property, Plant & Equip, Net
69.1
Other Assets
99.8
Total Assets
402.4
$
Current Liabilities
68.3
Other Liabilities
26.1
Long Term Debt
0.4
Total Liabilities
94.8
Shareholders' Equity
307.6
Total Liabilities & Equity
402.4
$
15
Cash & Equivalents
Shareholder Alignment
16
Executive Equity Ownership Program
Outright Ownership of 3X & 5X Total Cash Compensation
Stock Sales for Diversification Allowed/Encouraged Beyond
Required Ownership Levels
Board of Directors Ownership Program
5X Retainer
Stock Option Incentive Program (Approx. 200 Management
Participants)
Economic Profit Improvement is an Incentive Compensation
Component
Corporate Governance
ISS Corporate Governance Quotient 87.8 (11/3/04 Update)
Rated higher than 87.8% of companies in the Russell 3000
Segment Profiles
All are
Technically Driven Industrial Businesses
Customer and Solution Focused
Expanding Through New Products and Internationally
17
Communications Segment
TWACS® System
18
Communications
COOPS
Sales
EBIT
$38.4M
33%
53%
2004 CONTRIBUTION
$137.8M
x/ Corp Costs
19
Market Profile
ESCO Addressable Market
North American Automatic Meter
Reading (AMR) ~ $5B
105 Million Meters
72% Investor Owned
15% Municipal
13% COOP
Plus Developing
Demand Side Management
International
Served Markets
- Utility
- Video Security
Customer Base:
Two-way Automatic Communications System
20
TWACS®
Power Line Based Fixed Network System
Most Capable Proven System Available
>140 North American Utilities, ~8M End Points - Ordered or Installed
Can be Deployed System-wide
Versatility / Value-Added Features
Two-way Load Control
Time of Use
Outage Mapping
Remote Disconnect
Incorporates Patented Proprietary Technology
Communications
21
Growth Drivers
External
Utilities Focus
Cost
- Meter Reading
- Theft
- Call Center
Customer Service
- Billing Accuracy
- Call Center Responsiveness
- Outage Restoration
Advanced Metering
- Demand Response
Real time pricing
Critical peak pricing
ESCO
Existing Product Attributes
Investment in New Product Features / Further Differentiation
Acquisitions – Direct Access to Water and Gas
Filtration Segment
22
Filtration Segment
Sales
EBIT
$23.1M
32%
2004 CONTRIBUTION
$173.9M
41%
x/ Corp Costs
23
ESCO Addressable Market ~$4B
Served Markets: Liquid Only
– Health Care
– Automotive
– Consumer & Appl.
– Aerospace
Broad Blue Chip Customer Base:
Filtration
24
Growth Drivers
Leadership Position in Certain Niches Driven by Technology
Advancements and Customer Support
Medical Devices
Aerospace
Fuel Delivery
Served Market Growth: GDP+
New Products
Health Care (Medical Devices/Drug Delivery)
Intelligent Sensors
Micro-Propulsion Devices
Acquisitions
Medical Devices
Aerospace Drop-In
RF Shielding & Test Segment
25
RF Shielding & Test
Sales
EBIT
$11.3M
26%
15%
2004 CONTRIBUTION
$110.4M
26
x/ Corp Costs
Market Profile
ESCO Addressable Market ~ $500M
Served Markets
Electronics
- Automotive
Health Care
- Aerospace
Acoustics
Broad Blue Chip Customer Base:
RF Shielding & Test
27
ESCO is the global leader of radio frequency (RF) shielding
and electromagnetic compatibility (EMC) test products.
Growth Drivers
Proliferation of Wireless Devices
MRI
International
Government Security
Acoustics
Calibration Services
The Way Forward
28
Committed to $6.00 per share in ‘09
Continued Growth of Communications: IOUs
New Products in Filtration
Extend our Reach in Test
Selective Acquisitions
Continue to Aggressively work our Cost and
Improve our Competitive Position
Committed to $6.00 per share in ‘09
Appendix A
Reconciliation of Non-GAAP
Financial Measures
29
Reconciliation of Non-GAAP Financial
Measures FY 2004 ($M)
Note:
EBIT Margin greater than or equal to 18% in ESCO’s Financial Goals Section cannot be reconciled with a GAAP measure
as this represents a forward looking financial measure with no comparable
GAAP measurement quantifiable at this time.
EBIT margin is calculated as EBIT divided by Net Sales. EBIT is calculated as earnings before interest and taxes.
(12.2)
30
“Operational” excludes MicroSep (i.e. Disc Ops) and also $1.3M of Puerto Rico exit and severance charges.
Total
52.7
40.5
Continuing
Disc
Ops
Ops
Net Cash Provided by
55.4
(2.7)
Operating Activity
Less
Capital Expenditures
(10.8)
(1.4)
Free Cash Flow
44.6
(4.1)
GAAP
“Operational”
EBIT
59.7
61.0
EBIT Margin
14.1%
14.5%
Less:
Interest Expense (Income)
(0.8)
(0.8)
Income Tax Expense (benefit)
22.7
23.0
Net Earnings - Continuing Ops
37.8
38.8
EPS - Continuing Ops
2.84
$
2.91
$
31