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 12, 2008
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
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))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Today, November 12, 2008, the Registrant is issuing a press release (furnished
herewith as Exhibit 99.1 to this report) announcing its fiscal year 2008 fourth
quarter and full year financial and operating results. See Item 7.01, Regulation
FD Disclosure below.
ITEM 7.01 REGULATION FD DISCLOSURE
Today, the Registrant is issuing a press release (Exhibit 99.1) announcing its
fiscal year 2008 fourth quarter and full year financial and operating results.
The Registrant will conduct a related Webcast conference call today at 4:00 p.m.
central time. This press release 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 as Exhibit 99.1 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 "EBIT",
"EBIT margin", "EPS-Adjusted Basis", and "EBITDA".
The Registrant defines "EBIT" as earnings before interest and taxes from
continuing operations. The Registrant defines "EBIT margin" as EBIT as a percent
of net sales. The Registrant defines "EBITDA" as earnings before interest,
taxes, depreciation and amortization from continuing operations. The
Registrant's management evaluates the performance of its operating segments
based on EBIT and EBIT margin, and believes that EBIT 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 is also one of
the measures used by management in determining resource allocations within the
Registrant and incentive compensation. The Registrant's management believes
using "EPS - Adjusted Basis" and "EBITDA" as financial measures is important for
management and investors to understand the Company's operations and its ability
to service its debt.
The press release refers to 2008 "EPS-Adjusted Basis" which is "EPS-GAAP basis"
from continuing operations adjusted for "intangible asset amortization and
inventory step-up" exclusive of pre-tax intangible asset amortization expense
related to TWACS NG software, purchase accounting intangible amortization
related to the Registrant's acquisitions within the past three years and the
expense related to the purchase accounting step-up of Doble Engineering Company
(Doble) inventory. The press release refers to expected 2009 "EPS-Adjusted
Basis" which is "EPS- GAAP Basis" adjusted for "intangible asset amortization,
inventory step-up and non-recurring facility charges" exclusive of pre-tax
intangible asset amortization expense related to TWACS NG software, purchase
accounting intangible amortization related to the Registrant's acquisitions
within the past three years, the expense related to the purchase accounting
step-up of Doble inventory and the non-recurring Aclara RF facility relocation
costs.
The Registrant believes that the presentation of these operational measures
provides important supplemental information to management and investors
regarding financial and business trends relating to the Registrant's financial
condition and results of operations. The Registrant's management believes that
these measures provide an alternative method for assessing the Registrant's
expected future performance that is useful because they facilitate comparisons
with other companies in the Utility Solutions Group segment industry, many of
which use similar non-GAAP financial measures to supplement their GAAP results.
The Registrant provides this information to investors to enable them to perform
additional analyses of present and future operating performance, compare the
Registrant to other companies, and evaluate the Registrant's ongoing financial
operations.
The presentation of the information described above is intended to supplement
investors' 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 (loss), cash flows, financial position,
comprehensive income (loss), or any other measure as determined in accordance
with GAAP.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No. Description of Exhibit
99.1 Press Release dated November 12, 2008
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 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: November 12, 2008 By: /s/ G.E. Muenster
G.E. Muenster
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
99.1 Press Release dated November 12, 2008
Exhibit 99.1
ESCO TECHNOLOGIES
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 FISCAL YEAR 2008 RESULTS
---------------------------------------
ST. LOUIS, November 12, 2008 - ESCO Technologies Inc. (NYSE: ESE) today
announced its results for the fourth quarter and fiscal year ended September 30,
2008.
Within this release, references to "quarters" and "year-to-date" relate to
the fiscal quarters and fiscal years ended September 30 for the respective
periods noted.
Net earnings and EPS are presented from "Continuing Operations" and
"Discontinued Operations." Continuing Operations represent the results of the
ongoing businesses of the Company, and Discontinued Operations represent the
results of the filtration portion of Filtertek which was sold on November 25,
2007.
The reconciliation from "EPS - GAAP Basis" to "EPS - Adjusted Basis" noted
in the tables below excludes intangible asset amortization related to TWACS NG
software, purchase accounting amortization related to recent acquisitions, and
Doble's inventory step-up.
4th Quarter Summary ($ in millions):
- ------------------------------------
4th Qtr 4th Qtr
(Continuing Operations): 2008 2007 Delta
------------------------ ---- ---- -----
Net Sales $ 196.0 139.9 40.1%
EBIT $ 33.7 18.5 82.2%
Net Earnings $ 20.1 14.9 34.9%
==== ====
EPS - GAAP Basis $ 0.76 0.57 33.3%
==== ====
EPS - Adjusted Basis $ 0.87 0.62 40.3%
==== ====
(Discontinued Operations):
--------------------------
Net Earnings $ 4.4 1.7 N.M.
=== ===
EPS $ 0.17 0.07 N.M
==== ====
Total Year Summary ($ in millions):
- -----------------------------------
FY FY
(Continuing Operations): 2008 2007 Delta
------------------------ ---- ---- -----
Net Sales $ 623.8 444.7 40.3%
EBIT $ 80.8 37.4 116.0%
Net Earnings $ 47.4 30.4 55.9%
==== ====
EPS - GAAP Basis $ 1.80 1.15 56.5%
==== ====
EPS - Adjusted Basis $ 2.20 1.35 63.0%
==== ====
(Discontinued Operations):
--------------------------
Net Earnings (Loss) $ (0.7) 3.3 N.M.
===== ===
EPS $ (0.02) 0.13 N.M
====== ====
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.
Discontinued Operations
- -----------------------
Net earnings and EPS from discontinued operations were $4.4 million and
$0.17 per share, respectively for the 2008 fourth quarter. For the full year,
discontinued operations resulted in a net loss of $0.7 million or $0.02 per
share. The fourth quarter net earnings from discontinued operations resulted
from a tax true-up driven by the completion of the final purchase price
allocation as determined by the buyer of Filtertek. Also, foreign tax credits
related to Filtertek prior to its divestiture were finalized and recognized in
the 2008 fourth quarter.
Sales
- -----
Fourth quarter and total year sales increased 40 percent in 2008 compared
to the same periods in 2007 with all three operating segments contributing to
the sales growth.
Utility Solutions Group (USG) sales increased $50.9 million (79 percent)
and $165.3 million (84 percent) for the 2008 fourth quarter and fiscal year,
respectively, compared to the comparable periods of 2007 as a result of the
following:
o Doble sales were $22.2 million in the 2008 fourth quarter and $74.3 million
for the 10-month period since the date of acquisition;
o Fixed network RF AMI sales increased $21.5 million (114 percent) in the
2008 fourth quarter and $55.4 million (113 percent) for the year primarily
due to higher gas deliveries at PG&E and the sale of additional water AMI
products; and,
o Fixed network power-line system (PLS) AMI sales increased $6.9 million (18
percent) in the 2008 fourth quarter and $31.7 million (25 percent) for the
year as TWACS deliveries increased across all customer end-markets and due
to the completion of the PG&E contract as amended.
Test sales in 2008 increased in the fourth quarter and total year due to an
increase in international chamber deliveries.
Filtration sales increased $3.7 million (12 percent) in the fourth quarter
of 2008, and $10.6 million (10 percent) for the total year reflecting sales
increases across all product lines with particularly strong results recognized
in the aerospace end-markets.
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 fourth quarter and fiscal year 2008 included
the following:
In the USG segment, EBIT for the 2008 fourth quarter was $24.8 million
(21.5 percent of sales), compared to $10.1 million (15.7 percent of sales) in
the 2007 fourth quarter. The $14.7 million increase in EBIT dollars and the
increase in EBIT as a percent of sales was the result of the significant sales
increases across the segment as noted above. The 2008 fourth quarter also
included higher TWACS NG software amortization compared to the 2007 fourth
quarter ($2.9 million compared to $1.8 million). Total year 2008 EBIT was $66.3
million (18.3 percent of sales) compared to $22.0 million (11.1 percent of
sales) with the significant increase in dollars and percentage being driven by
the 84 percent increase in full-year sales within this segment.
In the Test segment, EBIT margins were slightly lower in 2008 due to
changes in sales mix involving additional large chambers and fewer high-margin
components sold versus 2007.
In the Filtration segment, EBIT dollars and EBIT margin increased in 2008
due to the increase in sales noted above and as a result of favorable sales mix
changes.
Corporate operating costs were higher in 2008 due to lower royalty income
and higher amortization expenses related to recent acquisitions that included
identifiable intangible assets.
Effective Tax Rate
- ------------------
The effective tax rate from Continuing Operations in the fourth quarter of
2008 was 35.2 percent compared to 19.0 percent in the fourth quarter of 2007,
and 33.3 percent compared to20.1 percent for the fiscal years 2008 and 2007,
respectively. The 2008 and 2007 tax rates were favorably benefited in varying
degrees by specific tax credits realized in the respective fiscal years (i.e.,
export-related benefits, research credits, domestic production deduction).
New Orders
- ----------
New orders received in the fourth quarters were $179.6 million in 2008
compared to $110.1 million in 2007, representing a 63 percent increase. For the
fiscal years, new orders increased approximately 35 percent in 2008 and were
$633.0 million in the current year compared to $470.2 million in 2007, resulting
in a backlog at September 30, 2008, of $266.8 million. Doble's orders for the
2008 fourth quarter and full year were $22.4 million and $78.6 million,
respectively.
Orders from PG&E received in the 2008 fourth quarter were $34.0 million and
included an additional 100,000 units in September related to the RF electric AMI
product. During fiscal 2008, total PG&E orders received were $111.8 million,
representing 1.9 million units. Total PG&E firm order quantities since inception
are 2.7 million units (2.0 million gas and 0.7 million electric) worth $171.2
million.
While only a nominal quantity is included in the order amounts noted above,
the Company previously announced that its AMI technology has been selected by
Idaho Power (estimated at 500,000 power-line system electric units, $25
million), New York City Water (estimated at 875,000 RF water units, $68.3
million), and Baltimore Gas & Electric (selected for RF pilot for gas and
electric trial).
Also in the 2008 fourth quarter, the Test segment was awarded one of the
largest contracts in its history when ETS-Lindgren signed a $16.7 million
contract with the National Automotive Testing and R&D Infrastructure Project
(NATRIP) in India to provide two automotive test chambers to support India's
most significant automotive initiative undertaken to date.
Cash Flow / Debt Position
- -------------------------
Net cash provided by operating activities from Continuing Operations was $76.3
million during fiscal 2008. At September 30, 2008, the Company had $28.7 million
in cash, $7 million of restricted cash included in other assets, and $233.7
million of total debt outstanding resulting in a net debt position of $198
million. This net debt position includes the cash used to acquire LDIC GmbH on
August 4, 2008, as previously announced.
Doble Purchase Accounting Items
- -------------------------------
The 2008 pretax amortization charge related to Doble's identifiable
intangible assets was $2.8 million. Additionally, Doble's finished goods
inventory was required to be "stepped up" under purchase accounting, which
caused finished goods inventory to be sold with no profit recognized. This
resulted in positive cash flow, but "lost" profit of $1.5 million in fiscal
2008.
Chairman's Commentary - 2008
- ----------------------------
Vic Richey, Chairman and Chief Executive Officer, commented, "I am very
pleased with our operating performance in 2008 as our growth in sales, earnings,
and entered orders continued to demonstrate ESCO's significant resiliency in a
challenging economic environment. We finished the year at a level well above
last year's sales, EBIT, EPS, cash flow, and entered orders. Our success in 2008
was clearly evident when looking at the double-digit growth percentages noted
throughout our financials, especially within the Utility Solutions Group."
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 software.
Aclara RF Facility Relocation
- -----------------------------
Due to its significant sales growth, Aclara RF Systems Inc. (formerly
Hexagram, Inc.) will be relocating to a newer, more efficient facility in the
greater Cleveland, Ohio, area during fiscal 2009. As a result, approximately
$2.0 million in pretax nonrecurring exit and relocation costs are expected to be
incurred in the Utility Solutions Group, primarily related to the noncash
write-off of leasehold improvements, vacant facility charges, and physical move
costs.
Revenues and Earnings Per Share - 2009
- --------------------------------------
In fiscal 2009, Management expects the following:
o Revenues between $680 million and $690 million;
o EPS - GAAP Basis of between $2.00 and $2.15 (which includes approximately
$0.05 per share related to the Aclara RF facility relocation charge noted
above);
o EPS - Adjusted Basis of between $2.42 and $2.57 per share; and,
o EBITDA of greater than $120 million.
EPS - Adjusted Basis excludes approximately $0.42 per share of costs
related to TWACS NG software amortization, purchase accounting intangible asset
amortization related to the Company's recent acquisitions, and Doble's purchase
accounting inventory step-up.
Additionally, interest expense for 2009 included in the EPS amounts noted
above is expected to be in the range of $0.22 to $0.24 per share, and fiscal
2009 stock compensation expense is expected to be in the range of $0.07 to $0.09
per share for the year.
The full-year 2009 tax rate is expected to be 35 to 37 percent, with
quarterly variations depending on the timing and amount of discrete tax benefits
and charges.
The 2009 quarterly earnings profile is projected to be back-end loaded, but
not as severely as fiscal 2008. GAAP earnings in the first half of fiscal 2009
are expected to be approximately $0.70 to $0.75 per share, which is
significantly higher than the $0.53 per share recognized in the first half of
fiscal 2008.
Chairman's Commentary - 2009
- ----------------------------
Mr. Richey further commented, "I am optimistic about our future based on
how well positioned we are heading into 2009. Having Doble for the full year and
beginning our AMI deployments with Idaho Power, New York City water, and our
near-term international opportunities will give us positive momentum throughout
2009."
Mr. Richey concluded, "I remain committed to our strategy to drive organic
growth across all operating segments through new product development and
attention to costs, supplemented by acquisition activity, to allow us to further
enhance our market presence world-wide. These actions will contribute
significantly to our stated goal of increasing long-term shareholder value."
Conference Call
- ---------------
The Company will host a conference call today, November 12, at 4 p.m.,
Central Time, to discuss the Company's fourth quarter and full-year 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
web site noted above or by phone (dial 1-888-203-1112 and enter the pass code
1439544).
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, EBITDA, interest expense, stock compensation expense, costs incurred with
the Aclara RF relocation and new building, the success of product development
and cost reduction efforts, the amortization of Doble's intangible assets,
future acquisitions, the fiscal 2009 effective annual tax rate, the success of
international AMR / AMI pilots and the success of international opportunities,
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 September 30, 2007, and in Part II, Item
1A of the Company's Quarterly Report on Form 10-Q for the three months ended
June 30, 2008; the success of the Company's competitors; changes in or the
effect of the Federal Energy Bill; the timing and content of purchase order
releases under the Company's AMI contracts; the Company's successful performance
of its AMI contracts; site readiness issues with Test segment customers;
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; material changes in the
costs of certain raw materials including steel and copper; delivery delays or
defaults by customers; termination for convenience ofcustomer contracts; timing
and magnitude of future contract awards; containment of engineering and
development costs; performance issues with key customers, suppliers and
subcontractors; labor disputes; changes in laws and regulations including but
not limited to changes in accounting standards and taxation requirements; costs
relating to environmental matters; uncertainty of disputes in litigation or
arbitration; the Company's successful execution of internal operating plans; and
the integration of newly acquired businesses.
ESCO, headquartered in St. Louis, is a proven supplier of special purpose
utility solutions for electric, gas, and water utilities, including hardware and
software to support advanced metering applications and fully automated
intelligent instrumentation. In addition, the Company provides engineered
filtration products to the aviation, space, and process markets worldwide and is
the industry leader in RF shielding and EMC test products. Further information
regarding ESCO and its subsidiaries is available on the Company's web site at
www.escotechnologies.com.
- tables attached -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Three Months
Ended Ended
September 30, September 30,
2008 2007
---- ----
Net Sales $196,032 139,892
Cost and Expenses:
Cost of sales 118,260 89,265
SG&A 39,288 28,571
Amortization of intangible assets 4,800 2,691
Interest expense 2,677 27
Other (income) expenses, net (8) 903
-- ---
Total costs and expenses 165,017 121,457
------- -------
Earnings before income taxes 31,015 18,435
Income taxes 10,908 3,510
------ -----
Net earnings from continuing operations 20,107 14,925
Earnings from discontinued operations,
net of tax expense of $515 - 1,697
Gain on sale from discontinued
operations, net of tax benefit of $4,652 4,398 -
------ -----
Net earnings from discontinued
operations 4,398 1,697
Net earnings $ 24,505 16,622
======== ======
Earnings per share:
Basic
Continuing operations 0.77 0.58
Discontinued operations 0.17 0.07
---- ----
Net earnings $ 0.94 0.65
======== ====
Diluted
Continuing operations 0.76 0.57
Discontinued operations 0.17 0.07
---- ----
Net earnings $ 0.93 0.64
======== ====
Average common shares O/S:
Basic 26,052 25,760
====== ======
Diluted 26,452 26,160
====== ======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
Year Ended Year Ended
September 30, September 30,
2008 2007
---- ----
Net Sales $623,817 444,704
Cost and Expenses:
Cost of sales 374,098 282,596
SG&A 151,173 111,610
Amortization of intangible assets 17,570 10,243
Interest expense (income) 9,812 (599)
Other expenses, net 149 2,815
--- -----
Total costs and expenses 552,802 406,665
------- -------
Earnings before income taxes 71,015 38,039
Income taxes 23,613 7,633
------ -----
Net earnings from continuing operations 47,402 30,406
(Loss) earnings from discontinued
operations, net of tax expense of $325 and
$1,382, respectively (115) 3,307
Loss on sale of discontinued
operations, net of tax of $157 (576) -
----- ----
Net (loss) earnings from discontinued
operations (691) 3,307
Net earnings $ 46,711 33,713
======== ======
Earnings per share:
Basic
Continuing operations 1.83 1.17
Discontinued operations (0.03) 0.13
----- ----
Net earnings $ 1.80 1.30
======== ====
Diluted
Continuing operations 1.80 1.15
Discontinued operations (0.02) 0.13
----- ----
Net earnings $ 1.78 1.28
======== ====
Average common shares O/S:
Basic 25,909 25,865
====== ======
Diluted 26,315 26,387
====== ======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
Three Months Ended Year Ended
September 30, September 30,
2008 2007 2008 2007
---- ---- ---- ----
Net Sales
- ---------
Utility Solutions $115,372 64,428 362,905 197,631
Test 46,171 44,697 144,770 141,492
Filtration 34,489 30,767 116,142 105,581
------ ------ ------- -------
Totals $196,032 139,892 623,817 444,704
======== ======= ======= =======
EBIT
- ----
Utility Solutions $ 24,761 10,109 66,301 22,000
Test 6,351 6,160 13,877 14,406(5)
Filtration 7,417 6,055 21,195 18,413
Corporate (4,837)(1) (3,862)(2) (20,546)(3) (17,379)(4)
------ ------ ------- -------
Consolidated EBIT 33,692 18,462 80,827 37,440
Interest (expense)/
income (2,677) (27) (9,812) 599
------ --- ------ ---
Earnings before
income taxes $ 31,015 18,435 71,015 38,039
======== ====== ====== ======
Note: Depreciation and amortization expense was $7.7 million and
$4.3 million for the quarters ended September 30, 2008 and 2007,
respectively, and $27.6 million and $16.4 million for the years
ended September 30, 2008 and 2007, respectively.
(1) Includes $1.2 million of amortization of acquired intangible assets.
(2) Includes $0.4 million of amortization of acquired intangible assets.
(3) Includes $4.2 million of amortization of acquired intangible assets.
(4) Includes $2.1 million of amortization of acquired intangible assets.
(5) Includes a $2.3 million charge related to the litigation award within
the Test segment and $0.3 million of legal costs associated with
arbitrating this dispute.
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
EPS - Adjusted Basis Reconciliation (Continuing Operations)
- -----------------------------------------------------------
Q4 08 Q4 07 FY 08 FY 07
----- ----- ----- -----
EPS - GAAP Basis $0.76 0.57 1.80 1.15
Adjustments (defined below) 0.11 0.05 0.40 0.20
---- ---- ---- ----
EPS - Adjusted Basis $0.87 0.62 2.20 1.35
===== ==== ==== ====
Adjustments exclude pretax 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. For the
year ended September 30, 2008, these adjustments consisted of $11.0 million of
pretax intangible asset amortization expense related to TWACS NG software, $4.2
million of amortization of acquired intangible assets, and a $1.5 million
inventory step-up.
EBITDA - FY 2009
- ----------------
EBITDA of greater than $120 million under "Revenues and Earnings Per Share -
2009" cannot be reconciled with a GAAP measure as this represents a
forward-looking measure with no comparable GAAP measurement quantifiable at this
time.
EPS - Adjusted Basis Reconciliation - FY 2009
- ---------------------------------------------
EPS - GAAP Basis - FY 2009 Range $2.00 2.15
Adjustments (defined below) 0.45 0.45
---- ----
EPS - Adjusted Basis - FY 2009 Range $2.45 2.60
===== ====
Adjustments exclude pretax intangible asset amortization expense related to
TWACS NG software, purchase accounting intangible amortization related to the
Company's acquisitions within the last three years, the expense related to the
purchase accounting step-up of Doble Engineering Company inventory and the
nonrecurring Aclara RF facility relocation costs.
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
September 30, September 30,
2008 2007
---- ----
Assets
Cash and cash equivalents $ 28,667 18,638
Accounts receivable, net 135,436 85,319
Costs and estimated earnings on long-term
contracts 9,095 11,520
Inventories 66,962 55,885
Current portion of deferred tax assets 15,368 25,264
Other current assets 15,108 28,054
Current assets from discontinued operations - 35,670
------- ------
Total current assets 270,636 260,350
Property, plant and equipment, net 72,591 50,193
Goodwill 329,478 124,757
Intangible assets, net 238,223 74,624
Other assets 17,745 10,338
Other assets from discontinued operations - 55,845
------- ------
$928,673 576,107
======== =======
Liabilities and Shareholders' Equity
Short-term borrowings and current maturities
of long-term debt $50,000 -
Accounts payable 49,329 45,726
Current portion of deferred revenue 18,920 24,621
Other current liabilities 50,434 31,859
Current liabilities from discontinued
operations - 16,994
------- ------
Total current liabilities 168,683 119,200
Long-term portion of deferred revenue 2,228 4,514
Deferred tax liabilities 83,515 18,522
Other liabilities 21,760 15,854
Long-term debt 183,650 -
Other liabilities from discontinued
operations - 2,534
Shareholders' equity 468,837 415,483
------- -------
$928,673 576,107
======== =======
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Year Ended
September 30, 2008
------------------
Cash flows from operating activities:
Net earnings $ 46,711
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Net loss from discontinued operations 691
Depreciation and amortization 27,634
Stock compensation expense 3,990
Changes in operating working capital (8,770)
Effect of deferred taxes 7,561
Change in deferred revenues and costs, net (2,780)
Other 1,213
-----
Net cash provided by operating
activities - continuing operations 76,250
Net loss from discontinued operations,
net of tax (691)
Net cash provided by discontinued
operations 1,581
-----
Net cash provided by operating
activities - discontinued operations 890
---
Net cash provided by
operating activities 77,140
------
Cash flows from investing activities:
Acquisition of businesses, net of cash
acquired (345,395)
Proceeds from sale of marketable securities 4,966
Change in restricted cash (6,841)
Additions to capitalized software (11,012)
Capital expenditures - continuing operations (16,683)
-------
Net cash used by investing activities -
continuing operations (374,965)
Capital expenditures - discontinued operations (1,126)
Proceeds from divestiture of business, net -
discontinued operations 74,370
------
Net cash provided by investing
activities - discontinued operations 73,244
------
Net cash used by investing activities (301,721)
--------
Cash flows from financing activities:
Proceeds from long-term debt 304,157
Principal payments on long-term debt (71,197)
Debt issuance costs (2,965)
Net decrease in short-term borrowings -
discontinued operations (2,844)
Excess tax benefit from stock options exercised 737
Proceeds from exercise of stock options 6,384
Other 338
---
Net cash provided by financing activities 234,610
-------
Net increase in cash and cash equivalents 10,029
Cash and cash equivalents, beginning of period 18,638
------
Cash and cash equivalents, end of period $ 28,667
========
- more -
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
Backlog And Entered Orders - Utility
- ----------------------------
Q4 FY 2008 Solutions Test Filtration Total
---------- --------- ---- ---------- -----
Beginning Backlog - 6/30/08
continuing opers $138,928 61,402 82,962 283,292
Entered Orders 101,987 54,592 22,990 179,569
Sales (115,372) (46,171) (34,489) (196,032)
-------- ------- ------- --------
Ending Backlog - 9/30/08 $125,543 69,823 71,463 266,829
======== ====== ====== =======
Backlog And Entered Orders - Utility
- ----------------------------
FY 2008 Solutions Test Filtration Total
------- --------- ---- ---------- -----
Beginning Backlog - 9/30/07
continuing opers $123,176 60,038 74,394 257,608
Entered Orders 365,272 154,555 113,211 633,038
Sales (362,905) (144,770) (116,142) (623,817)
-------- -------- -------- --------
Ending Backlog - 9/30/08 $125,543 69,823 71,463 266,829
======== ====== ====== =======
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