2013-02-07 22:01:19 -
ST. LOUIS, February 7, 2013 - ESCO Technologies Inc. (NYSE: ESE) today reported
its operating results for the first quarter ended December 31, 2012.
As noted in the November 12, 2012 earnings release, the Company provided EPS
guidance for 2013 on an adjusted basis, which excluded certain costs associated
with the Test segment restructuring. Management believes EPS - "As Adjusted" is
a better indicator of the Company's 2013 performance and allows shareholders
better visibility into the underlying operations of the Company.
Summary Highlights
* Q1 2013 EPS - "As Adjusted" was $0.05 per share, with GAAP EPS of $0.01 per
share compared to $0.19 in Q1 2012;
* During Q1 2013, the Company recorded an additional $44 million in orders
from Southern California Gas Company (SoCalGas), resulting in program-to-
date orders of $139 million through December 31, 2012;
* Subsequent to December 31, 2012, an additional $4 million in orders were
received from SoCalGas;
* Consolidated orders were $195 million in Q1 2013, resulting in a book-to-
bill ratio of 1.34x, and firm backlog of $457 million at December 31, 2012.
Backlog increased $50 million, or 12 percent, in Q1 2013 since September
30, 2012;
* Segment book-to-bill ratios for Q1 2013 were: Utility Solutions Group (USG)
1.52x, Filtration 1.23x, and Test 1.18x;
* Consolidated Q1 2013 sales were $145 million compared to $153 million in Q1
2012, with Filtration increasing 7 percent, USG was lower due to the timing
of power-line sales throughout the respective years, and Test was lower due
to the timing of major projects;
* SG&A decreased to $47 million in Q1 2013 from $49 million in Q1 2012
primarily due to lower costs in USG as certain new product development (NPD)
projects were completed in the second half of 2012, with the related
products being introduced to the market. In addition, Test spending was
lower as several cost savings initiatives were realized; and,
* The 17 percent effective tax rate in Q1 2013 is the result of an
insignificant discrete tax benefit ($50,000) being divided into the small
pretax earnings amount.
Chairman's Commentary
Vic Richey, Chairman and Chief Executive Officer, commented, "I'm satisfied with
our operating results in the first quarter, with the highlights including
another strong quarter of entered orders, and the formal launch of the SoCalGas
deployment. Having all three segments reporting strong order growth in the
Quarter certainly bodes well for the balance of the year.
"I'm also pleased to note that we wrapped up the quarter with several pieces of
good news on the M&A front, with the acquisition of innovative smart grid
technologies from Metrum Technologies LLC, and the addition of the Finepoint
Circuit Breaker Conference to Doble's globally recognized industry conference
offerings. Each of these acquisitions adds to our ability to better serve our
customers in providing best-in-class solutions.
"Operationally, Filtration continued its outstanding performance on both the top
and bottom line, and Test came in as expected. The Test restructuring is on plan
and should be completed within the timeframe and cost parameters noted earlier.
Regarding orders and backlog, Test is off to a strong start in 2013 as several
large projects were awarded in the first quarter. They included a large domestic
automotive test chamber and a project related to a new market area for Test,
where we are installing critical RF shielding at a large utility's data center
to prevent electro-magnetic pulse (EMP) interference, thereby enhancing security
and reliability. We expect this new market initiative to grow over the next few
years.
"USG was expected to be soft in the first quarter and the results reflect that.
Aclara was expected to report a loss as our cost structure is set up for the
sales volumes planned over the balance of the year. Additionally, we had a
modest headwind at Doble resulting from the East Coast storm that delayed some
product and service revenues as several large utilities across the Eastern part
of the country redirected their maintenance efforts to support the restoration
of power to those most affected. This was a timing issue impacting Q1, and Doble
does not expect this to impact its year.
"We expect to see sequential sales and EPS growth in each of the next three
quarters, and the second half of the year is expected to be significantly higher
than the first half. I remain excited about our growth in 2013 and our
commitment remains the same - to achieve our long-term goal of increasing
shareholder value."
Dividend Payment
The next quarterly cash dividend of $0.08 per share will be paid on April 18 to
stockholders of record on April 4.
Share Repurchase Program
During the first quarter ended December 31, 2012, the Company spent
approximately $10 million to repurchase approximately 270,000 shares, bringing
the total amounts repurchased under the current authorization to approximately
$15 million and 420,000 shares.
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.
Test Segment Restructuring
As described in the Company's November 12, 2012 release, Management announced
the restructuring of the Test segment, which included the closure of the
Glendale Heights, Illinois facility. Management previously announced it was
analyzing the operating cost structure across the Company to see where
improvements in operating efficiency could be achieved. This process was
undertaken to help protect and expand future operating margins, as well as to
supplement future EPS growth.
During Q1 2013, Test incurred $1 million of costs related to the Glendale
Heights facility lease buyout and severance. Total restructuring costs are
expected to be approximately $3 million and will be incurred through March
31, 2013. As a result of these actions, the partial year cost savings in 2013
will be approximately $1 million (excluding restructuring costs), and once
completed, are expected to yield recurring annual savings of approximately
$3 million in 2014 and beyond. The net impact of this restructuring is expected
to increase Test segment EBIT margins above 13 percent beginning in 2014.
While further restructuring activities of this magnitude are not currently
expected, Management continues to review all of its other operations to ensure
that the respective businesses are properly sized to deliver the operating
results required to meet the earnings commitments previously communicated.
Fiscal Year 2013
Management's expectations for 2013 are consistent with the guidance presented in
the November 12, 2012 release.
Management continues to see strong growth in 2013 across the business. Based on
projected revenue growth of approximately 10 percent, Management expects 2013
EPS - "As Adjusted" in the range of $2.30 to $2.50 per share, which excludes
estimated Test segment restructuring charges. The 2013 effective tax rate is
expected to be 33 percent.
On a quarterly basis, Management expects 2013 revenues and EPS to be
significantly second half weighted. The first half of 2013 reflects the initial
deliveries to SoCalGas against the full operating infrastructure in place to
support the project. Additionally, the first half of 2013 is expected to be
lower than the first half of 2012 due to fewer electric COOP shipments in 2013.
The anticipated sales and EPS growth in the second half of 2013 will be
supported by SoCalGas being in full deployment mode, Test having completed its
facility restructuring delivering higher margins, higher electric COOP shipments
(timing during the year), and the water business delivering at higher levels
than in the first half.
Conference Call
The Company will host a conference call today, February 7, at 4 p.m. Central
Time, to discuss the Company's first quarter 2013 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 1-888-843-7419 and enter the pass code
34018852).
Forward-Looking Statements
Statements in this press release regarding the amount and timing of the
Company's expected 2013 and beyond revenues, growth, margins, tax rates, EPS,
EBIT, sales, orders, the timing, size and success of the SoCalGas AMI project,
the costs, benefits and timing of the Test segment restructure, the amount and
timing of COOP shipments and water business, the likelihood of further
restructuring activities, new products, new market initiatives, the size, number
and timing of growth opportunities in the future, 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, 2012; and the following: changes in requirements or financial
constraints impacting SoCalGas; 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;
delivery delays or defaults by customers; the performance of the Company's
international operations; material changes in the costs and availability of
certain raw materials; termination for convenience of customer contracts; timing
and content of future contract awards and customer orders; containment of
engineering and development costs; performance issues with key customers,
suppliers and subcontractors; labor disputes; the impacts of natural disasters
such as hurricanes on the Company's operations and those of the Company's
customers and suppliers; changes in laws and regulations, including but not
limited to changes in accounting standards and taxation requirements; costs
relating to environmental matters arising from current or former facilities;
uncertainty regarding the ultimate resolution of current disputes, claims,
litigation or arbitration; the Company's successful execution of internal
restructuring plans; and the Company's ability to successfully integrate newly-
acquired businesses.
Non-GAAP Financial Measures
The financial measures EBIT, EBIT margin and EPS - "As Adjusted" are presented
in this press release. The Company defines EBIT as earnings before interest and
taxes from continuing operations, EBIT margin as a percent of net sales and EPS
- "As Adjusted" as GAAP EPS less the Test segment restructuring charges
(representing $0.04 per share during the first quarter of 2013). EBIT, EBIT
margin and EPS - "As Adjusted" are not recognized in accordance with U.S.
generally accepted accounting principles (GAAP). However, Management believes
that EBIT and EBIT margin are useful in assessing the operational profitability
of the Company's business segments because they exclude interest and taxes,
which are generally accounted for across the entire Company on a consolidated
basis. EBIT is also one of the measures used by Management in determining
resource allocations within the Company as well as incentive compensation. The
Company believes that the presentation of EBIT, EBIT margin and EPS - "As
Adjusted" provides important supplemental information to investors by
facilitating comparisons with other companies, many of which use similar non-
GAAP financial measures to supplement their GAAP results. The use of non-GAAP
financial measures is not intended to replace any measures of performance
determined in accordance with GAAP.
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.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except per share amounts)
+------------+ +------------+
|Three Months| |Three Months|
| Ended | | Ended |
|December 31,| |December 31,|
| 2012 | | 2011 |
+------------+ +------------+
Net Sales $ 145,265 152,925
Cost and Expenses:
Cost of sales 94,038 92,721
Selling, general and administrative
expenses 46,939 48,690
Amortization of intangible assets 3,500 3,153
Interest expense 563 491
Other (income) expenses, net (72) (472)
-------------- --------------
Total costs and expenses 144,968 144,583
-------------- --------------
Earnings before income taxes 297 8,342
Income taxes 51 3,135
-------------- --------------
Net earnings $ 246 5,207
-------------- --------------
Earnings per share:
Basic
Net earnings $ 0.01 0.20
-------------- --------------
Diluted
Net earnings $ 0.01 0.19
-------------- --------------
Average common shares O/S:
Basic 26,495 26,671
-------------- --------------
Diluted 26,680 26,857
-------------- --------------
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
+-------------------------+
| Three Months Ended |
| December 31, |
+-------------------------+
2012 2011
--------- ---------------
Net Sales
Utility Solutions Group $ 62,618 70,349
Test 36,295 39,354
Filtration 46,352 43,222
--------- ---------------
Totals $ 145,265 152,925
--------- ---------------
EBIT
Utility Solutions Group $ (2,208) 4,966
Test 519 1,947
Filtration 8,801 8,236
Corporate (6,252) (1) (6,316) (2)
--------- ---------------
Consolidated EBIT 860 8,833
Less: Interest expense (563) (491)
--------- ---------------
Earnings before income taxes $ 297 8,342
--------- ---------------
Note: Depreciation and amortization expense was $6.5 million and
$6.0 million
for the quarters ended December 31, 2012 and 2011,
respectively.
Includes $0.9 million of amortization of acquired
(1) intangible assets.
Includes $1.2 million of amortization of acquired
(2) intangible assets.
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
+------------+ +-------------+
|December 31,| |September 30,|
| 2012 | | 2012 |
+------------+ +-------------+
Assets
Cash and cash equivalents $ 33,489 30,215
Accounts receivable, net 132,411 151,051
Costs and estimated earnings on
long-term contracts 10,669 14,567
Inventories 118,934 108,061
Current portion of deferred tax assets 22,577 22,313
Other current assets 25,551 17,237
-------------- ---------------
Total current assets 343,631 343,444
Property, plant and equipment, net 79,806 75,876
Intangible assets, net 244,526 231,473
Goodwill 388,352 361,280
Other assets 22,516 21,680
-------------- ---------------
$ 1,078,831 1,033,753
-------------- ---------------
Liabilities and Shareholders' Equity
Short-term borrowings and current maturities
of long-term debt $ 51,630 50,000
Accounts payable 45,985 54,049
Current portion of deferred revenue 28,355 24,920
Other current liabilities 68,976 75,236
-------------- ---------------
Total current liabilities 194,946 204,205
Deferred tax liabilities 90,737 88,675
Other liabilities 58,955 44,560
Long-term debt 113,000 65,000
Shareholders' equity 621,193 631,313
-------------- ---------------
$ 1,078,831 1,033,753
-------------- ---------------
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
+-------------+
| Three Months|
| Ended |
|December 31, |
| 2012 |
+-------------+
Cash flows from operating activities:
Net earnings $ 246
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 6,472
Stock compensation expense 1,157
Changes in current assets and liabilities (4,975)
Effect of deferred taxes 1,798
Change in deferred revenue and costs, net (1,073)
Pension contributions (730)
Other (1,242)
---------------
Net cash provided by operating activities 1,653
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired (28,247)
Capital expenditures (5,348)
Additions to capitalized software (4,017)
---------------
Net cash used by investing activities (37,612)
Cash flows from financing activities:
Proceeds from long-term debt 53,630
Principal payments on long-term debt (4,000)
Dividends paid (2,132)
Purchases of common stock into treasury (9,703)
Other 463
---------------
Net cash provided by financing activities 38,258
---------------
Effect of exchange rate changes on cash and cash equivalents 975
---------------
Net increase in cash and cash equivalents 3,274
Cash and cash equivalents, beginning of period 30,215
---------------
Cash and cash equivalents, end of period $ 33,489
---------------
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data (Unaudited)
(Dollars in thousands)
+---------+ +--------+ +----------+ +---------+
Backlog And Entered Orders - Q1 | Utility | | Test | |Filtration| | Total |
FY 2013 |Solutions| | | | | | |
+---------+ +--------+ +----------+ +---------+
Beginning Backlog - 10/1/12 $ 187,795 79,418 139,689 406,902
Entered Orders 95,082 42,837 57,151 195,070
Sales (62,618) (36,295) (46,352) (145,265)
----------- ---------- ------------ -----------
Ending Backlog - 12/31/12 $ 220,259 85,960 150,488 456,707
----------- ---------- ------------ -----------
SOURCE ESCO Technologies Inc.
Kate Lowrey, Director, Investor Relations, ESCO Technologies Inc.,
+1-314-213-7277; or Media, David P. Garino, +1-314-982-0551
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: ESCO Technologies Inc via Thomson Reuters ONE
[HUG#1675766]
