Attached files
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| 8-K - ESCO TECHNOLOGIES 8-K - ESCO TECHNOLOGIES INC | nov2011esco8k.htm |
Exhibit 99.1
NEWS FROM ESCO TECHNOLOGIES
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For more information contact:
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For media inquiries:
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Kate Lowrey
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David P. Garino
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Director, Investor Relations
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(314) 982-0551
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ESCO Technologies Inc.
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(314) 213-7277
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ESCO ANNOUNCES FISCAL YEAR 2011 RESULTS
ST. LOUIS, November 8, 2011 – ESCO Technologies Inc. (NYSE: ESE) today reported its operating results for the fourth quarter and fiscal year ended September 30, 2011.
Summary Highlights
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Fiscal year 2011 net sales increased $86 million, or 14 percent, to $694 million compared to $607 million in FY 2010. All three segments contributed to the increase, which occurred in spite of the $40 million decrease in Utility Solutions Group (USG) sales to PG&E and New York City as these projects near completion;
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Q4 2011 net sales decreased $17 million compared to Q4 2010 resulting from a $28 million decrease in fourth quarter 2011 sales to PG&E and New York City, partially offset by higher sales in Filtration and Test;
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Filtration net sales increased $9 million, or 24 percent over Q4 2010, and increased $47 million, or 39 percent for the fiscal year;
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Test net sales increased $11 million, or 25 percent over Q4 2010, and increased $38 million, or 28 percent for the fiscal year;
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USG net sales were $86 million in Q4 2011 compared to $123 million in Q4 2010, and for the full year, net sales increased to $350 million from $348 million;
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Within USG, Aclara sales decreased in the 2011 fourth quarter and fiscal year due to lower volumes at PG&E and New York City, while Doble sales increased modestly in the fourth quarter and increased 13 percent for the year;
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Gross margins in Q4 2011 were negatively impacted by $6.5 million in charges related to the write-down of certain USG inventory that Aclara determined to be obsolete because next-generation AMI products are currently being offered for sale;
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Other income in Q4 2011 was favorably impacted by $6.6 million in gains related to the revaluation of the earn-out related to a previous acquisition;
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FY 2011 EPS was $1.95 per share, compared to $1.68 in FY 2010;
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Q4 2011 EPS was $0.57 per share, compared to $0.89 in Q4 2010;
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Net cash provided by operating activities for FY 2011 was $76 million compared to $67 million in FY 2010;
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FY 2011 entered orders were $676 million compared to $669 million in FY 2010 resulting in a firm order backlog of $343 million at September 30, 2011; and
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FY 2011 entered orders included $20 million of initial AMI software and services for Southern California Gas Co. (SoCalGas).
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Chairman’s Commentary – Fiscal 2011
Vic Richey, Chairman and Chief Executive Officer, commented, “I’m pleased with the way we ended fiscal 2011 as we closed out the year at the top end of both our sales and EPS ranges. At the start of the year, we had expected sales and EPS growth to come in between 10 and 15 percent.
“With the PG&E gas and New York City water projects winding down throughout 2011, coupled with the additional Smart Grid investments we made, we fully expected fourth quarter sales and EBIT to be lower than the prior year. I’m pleased to report that notwithstanding the decrease in sales to PG&E and New York City, Aclara’s sales to COOP and international customers were above internal expectations. Additionally, Doble continues to outperform as it finished the year with sales up 13 percent over prior year while maintaining its EBIT margin above 22 percent.
“Entered orders for the year were consistent with our original plan, coming in at $676 million, including SoCalGas orders of $20 million in 2011. I continue to be excited about the Test business and its future as it continues to strengthen its global market leadership position, and Filtration contributed another strong order quarter. I expect Test and Filtration to continue making a solid contribution as we enter 2012.”
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.
Dividend Payment
The next quarterly cash dividend of $0.08 per share will be paid on January 20 to stockholders of record on January 6.
Fiscal Years 2012 / 2013
Management’s expectations for fiscal years 2012 and 2013 include the following assumptions:
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Sales are expected to increase in the low-to-mid single digits in 2012 and are expected to increase more than 15 percent in 2013 over 2012.
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The 2012 sales growth is muted by a $40 million sales decrease at PG&E and New York City since the projects are nearly completed, partially offset by initial sales at SoCalGas, reflecting the initial deployment of network infrastructure and software.
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The significant sales growth expected in 2013 will be driven by Aclara (SoCalGas metering endpoint ramp-up and higher international sales) and Doble (new online products and solutions, and additional international sales offices).
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EPS is expected to grow approximately 5 to 10 percent in fiscal 2012, and is expected to increase more than 25 percent in 2013 over 2012.
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The 2012 EPS growth is impacted by lower PG&E and New York City sales and the initial deployment of lower-margin network infrastructure and software related to SoCalGas.
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The anticipated 2013 EPS growth reflects the significant sales and profit contributions of Aclara and Doble, as well as reasonable profit growth expected from Filtration and Test.
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The 2012 effective tax rate is expected to be between 33 and 35 percent.
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On a quarterly basis, Management expects 2012 revenues and EPS to be more second half weighted than the quarterly profile reported in fiscal 2011.
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Chairman’s Commentary – 2012 / 2013
Mr. Richey concluded, “In spite of today’s global economic challenges, I am pleased to report that we expect reasonable sales and EPS growth in 2012. Looking ahead, we expect significant sales and EPS growth in 2013 and beyond. I remain enthusiastic about our future as I see meaningful growth opportunities across all three segments.
“We expect our near-term growth projections to be led by the largest AMI gas project in North America, supplemented by our international opportunities at Aclara and Doble, and complemented by our expected domestic growth across all three operating segments.
“Doble continues to be a bright spot for us, and I believe, may not be fully appreciated by the investment community. While the electric utility industry’s aging infrastructure certainly works to Doble’s favor domestically, the growth opportunities internationally are even more significant. Coupled with our new products, solutions, and international expansion, our strategic initiatives at Doble should allow us to realize significant sales growth over the next several years, all while maintaining its mid-20s EBIT margins.
“Our commitment remains the same − to achieve our long-term goal of increasing shareholder value.”
Conference Call
The Company will host a conference call today, November 8, at 4 p.m. Central Time, to discuss the Company’s fourth quarter and fiscal year 2011 operating results. A live audio webcast will be available on the Company’s website at www.escotechnologies.com. Please access the website 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 8574010).
Forward-Looking Statements
Statements in this press release regarding the amount and timing of the Company’s expected 2012 and beyond revenues, EPS, sales, orders, investments, the size and success of the SoCalGas AMI project, the size, number and timing of growth opportunities in the future, success in capturing international and domestic opportunities, development and success of new products and technologies, the long-term success of the Company, and any other 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, 2010; changes in requirements of SoCalGas; SoCalGas’ ability to successfully negotiate appropriate terms and conditions with other subcontractors and project participants; the performance of SoCalGas employees, vendors and other participants in connection with project responsibilities; the Company’s successful performance of the SoCalGas agreement; financial constraints impacting SoCalGas; the receipt of necessary regulatory approvals pertaining to the SoCalGas project; the impact that recent flooding in Thailand may have on the availability of components utilized by Aclara; the success of the Company’s competitors; changes in federal or state energy laws; 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 and availability of certain raw materials including steel and copper; worldwide availability of electronic components; termination for convenience of customer 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; and the Company’s successful execution of internal operating plans.
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 website at www.escotechnologies.com.
- tables attached -
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
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Three Months
Ended
September 30, 2011
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Three Months
Ended
September 30, 2010
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Net Sales
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$ | 190,701 | 207,925 | |||||
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Cost and Expenses:
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Cost of sales
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123,239 | 123,114 | ||||||
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Selling, general and administrative expenses
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47,963 | 43,186 | ||||||
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Amortization of intangible assets
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3,039 | 2,971 | ||||||
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Interest expense
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647 | 949 | ||||||
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Other (income) expenses, net
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(4,082 | ) | 1,065 | |||||
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Total costs and expenses
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170,806 | 171,285 | ||||||
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Earnings before income taxes
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19,895 | 36,640 | ||||||
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Income taxes
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4,512 | 12,743 | ||||||
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Net earnings
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$ | 15,383 | 23,897 | |||||
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Earnings per share:
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Basic
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Net earnings
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$ | 0.58 | 0.90 | |||||
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Diluted
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Net earnings
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$ | 0.57 | 0.89 | |||||
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Average common shares O/S:
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Basic
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26,624 | 26,486 | ||||||
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Diluted
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26,893 | 26,736 | ||||||
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share amounts)
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Twelve Months
Ended
September 30, 2011
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Twelve Months
Ended
September 30, 2010
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Net Sales
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$ | 693,711 | 607,493 | |||||
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Cost and Expenses:
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Cost of sales
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424,846 | 361,942 | ||||||
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Selling, general and administrative expenses
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182,530 | 157,348 | ||||||
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Amortization of intangible assets
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11,982 | 11,633 | ||||||
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Interest expense
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2,493 | 3,977 | ||||||
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Other (income) expenses, net
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(5,098 | ) | 2,928 | |||||
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Total costs and expenses
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616,753 | 537,828 | ||||||
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Earnings before income taxes
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76,958 | 69,665 | ||||||
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Income taxes
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24,457 | 24,819 | ||||||
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Net earnings
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$ | 52,501 | 44,846 | |||||
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Earnings per share:
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Basic
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Net earnings
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$ | 1.97 | 1.70 | |||||
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Diluted
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Net earnings
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$ | 1.95 | 1.68 | |||||
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Average common shares O/S:
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Basic
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26,588 | 26,450 | ||||||
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Diluted
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26,903 | 26,738 | ||||||
- more -
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information
(Unaudited)
(Dollars in thousands)
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Three Months Ended
September 30,
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Twelve Months Ended
September 30,
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2011
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2010
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2011
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2010
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Net Sales
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Utility Solutions Group
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$ | 85,561 | 123,381 | 349,579 | 348,331 | |||||||||||||||||||||||||||
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Test
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56,609 | 45,274 | 176,563 | 138,417 | ||||||||||||||||||||||||||||
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Filtration
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48,531 | 39,270 | 167,569 | 120,745 | ||||||||||||||||||||||||||||
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Totals
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$ | 190,701 | 207,925 | 693,711 | 607,493 | |||||||||||||||||||||||||||
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EBIT
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Utility Solutions Group
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$ | 10,682 | 31,754 | 54,279 | 67,369 | |||||||||||||||||||||||||||
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Test
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6,900 | 5,992 | 18,639 | 12,185 | ||||||||||||||||||||||||||||
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Filtration
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9,205 | 8,086 | 30,809 | 19,505 | ||||||||||||||||||||||||||||
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Corporate
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(6,245 | ) (1) | (8,243 | ) (2) | (24,276 | ) (3) | (25,417 | ) (4) | ||||||||||||||||||||||||
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Consolidated EBIT
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20,542 | 37,589 | 79,451 | 73,642 | ||||||||||||||||||||||||||||
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Less: Interest expense
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(647 | ) | (949 | ) | (2,493 | ) | (3,977 | ) | ||||||||||||||||||||||||
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Earnings before income taxes
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$ | 19,895 | 36,640 | 76,958 | 69,665 | |||||||||||||||||||||||||||
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Note:Depreciation and amortization expense was $6.1 million and $5.6 million for the quarters ended September 30, 2011 and 2010, respectively, and $23.5 million and $22.1 million for the years ended September 30, 2011 and 2010, respectively.
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(1) Includes $1.1 million of amortization of acquired intangible assets.
(2) Includes $1.2 million of amortization of acquired intangible assets.
(3) Includes $4.6 million of amortization of acquired intangible assets.
(4) Includes $4.8 million of amortization of acquired intangible assets.
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
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September 30,
2011
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September 30, 2010
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Assets
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Cash and cash equivalents
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$ | 34,158 | 26,508 | |||||
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Accounts receivable, net
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144,083 | 141,098 | ||||||
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Costs and estimated earnings on long-term
contracts
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12,974 | 12,743 | ||||||
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Inventories
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96,986 | 83,034 | ||||||
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Current portion of deferred tax assets
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20,630 | 15,809 | ||||||
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Other current assets
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19,523 | 17,169 | ||||||
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Total current assets
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328,354 | 296,361 | ||||||
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Property, plant and equipment, net
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73,067 | 72,563 | ||||||
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Goodwill
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361,864 | 355,656 | ||||||
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Intangible assets, net
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231,848 | 229,736 | ||||||
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Other assets
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16,704 | 19,975 | ||||||
| $ | 1,011,837 | 974,291 | ||||||
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Liabilities and Shareholders’ Equity
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Short-term borrowings and current maturities
of long-term debt
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$ | 50,000 | 50,000 | |||||
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Accounts payable
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54,037 | 59,088 | ||||||
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Current portion of deferred revenue
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24,499 | 21,907 | ||||||
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Other current liabilities
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77,301 | 55,985 | ||||||
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Total current liabilities
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205,837 | 186,980 | ||||||
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Deferred tax liabilities
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85,313 | 79,388 | ||||||
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Other liabilities
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44,977 | 47,941 | ||||||
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Long-term debt
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75,000 | 104,000 | ||||||
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Shareholders’ equity
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600,710 | 555,982 | ||||||
| $ | 1,011,837 | 974,291 | ||||||
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
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Twelve Months Ended
September 30, 2011
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Cash flows from operating activities:
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Net earnings
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$ | 52,501 | ||
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Adjustments to reconcile net earnings to net cash
provided by operating activities:
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Depreciation and amortization
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23,521 | |||
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Stock compensation expense
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4,670 | |||
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Changes in current assets and liabilities
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(1,542 | ) | ||
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Effect of deferred taxes
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3,551 | |||
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Change in acquisition earnout obligation
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(7,595 | ) | ||
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Pension contributions
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(5,230 | ) | ||
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Change in deferred revenue and costs, net
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2,565 | |||
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Amortization of prepaid debt fees
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772 | |||
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Other
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2,653 | |||
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Net cash provided by operating activities
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75,866 | |||
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Cash flows from investing activities:
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Acquisition of businesses
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(4,982 | ) | ||
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Additions to capitalized software
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(14,151 | ) | ||
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Capital expenditures
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(13,709 | ) | ||
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Change in restricted cash (acquisition escrow)
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1,361 | |||
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Net cash used by investing activities
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(31,481 | ) | ||
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Cash flows from financing activities:
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Proceeds from long-term debt
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49,370 | |||
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Principal payments on long-term debt
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(78,370 | ) | ||
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Dividends paid
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(8,534 | ) | ||
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Proceeds from exercise of stock options
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762 | |||
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Other
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370 | |||
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Net cash used by financing activities
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(36,402 | ) | ||
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Effect of exchange rate changes on cash and cash equivalents
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(333 | ) | ||
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Net increase in cash and cash equivalents
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7,650 | |||
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Cash and cash equivalents, beginning of period
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26,508 | |||
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Cash and cash equivalents, end of period
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$ | 34,158 | ||
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Add Ten
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ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data
(Unaudited)
(Dollars in thousands)
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Backlog And Entered Orders – Q4 FY 2011
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Utility Solutions
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Test
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Filtration
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Total
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Beginning Backlog – 6/30/11
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$ | 145,637 | 108,474 | 133,029 | 387,140 | |||||||||||
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Entered Orders
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65,276 | 34,991 | 46,367 | 146,634 | ||||||||||||
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Sales
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(85,561 | ) | (56,609 | ) | (48,531 | ) | (190,701 | ) | ||||||||
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Ending Backlog – 9/30/11
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$ | 125,352 | 86,856 | 130,865 | 343,073 | |||||||||||
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Backlog And Entered Orders – FY 2011
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Utility Solutions
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Test
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Filtration
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Total
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Beginning Backlog – 10/1/10
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$ | 153,478 | 74,333 | 132,835 | 360,646 | |||||||||||
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Entered Orders
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321,453 | 189,086 | 165,599 | 676,138 | ||||||||||||
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Sales
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(349,579 | ) | (176,563 | ) | (167,569 | ) | (693,711 | ) | ||||||||
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Ending Backlog – 9/30/11
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$ | 125,352 | 86,856 | 130,865 | 343,073 | |||||||||||
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