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ESE Esco

Filed: 19 Nov 20, 4:15pm

 

EXHIBIT 99.1

NEWS FROM

 

For more information contact:

Kate Lowrey

Director, Investor Relations

ESCO Technologies Inc.

(314) 213-7277

 

ESCO ANNOUNCES FISCAL 2020 RESULTS

 

- GAAP EPS $3.90 (Includes Technical Packaging Gain and Pension Termination Charge) –

- Adjusted EPS $2.76 (Tops Consensus Estimate)

- Net Debt of $10 Million, Leverage Ratio 0.47x, Liquidity of $725 Million -

 

ST. LOUIS, November 19, 2020 – ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the fourth quarter (Q4 2020) and fiscal year (2020) ended September 30, 2020.

 

COVID-19 Update

 

Vic Richey, Chairman and Chief Executive Officer, commented, “As we continue to manage through the COVID-19 global pandemic, we remain focused on the health and safety of our employees, customers and suppliers, thereby securing the financial well-being of the Company.

 

“Our 2020 results reflect the importance of maintaining diversity across our end-markets, as this diversity, coupled with our strong balance sheet and substantial liquidity will support our long-term growth. Because of our multi-segment platform, we were able to partially mitigate COVID-19’s impact on sales and earnings as we reported 2020 sales of $733 million with an Adjusted EBITDA of $137 million and Adjusted EPS of $2.76 per share. Additionally, we generated record cash flow in 2020 and paid down our net debt to $10 million resulting in a 0.47 leverage ratio at September 30th. Driven by effective cost management, solid operating execution, and acquisition contributions, we delivered solid performance in a challenging year.

 

“I’m confident that our well-tested operating model and our track record of taking action to reduce spending and resize the business will position us for solid earnings growth as our end-markets return to normal.

 

“Our deep and experienced leadership team has us well-positioned for the future and we continue to invest in growth initiatives both organically and through acquisition. The fundamentals of our portfolio remain strong and our goal remains the same – to create long-term shareholder value.”

 

 

 

2020 Discrete Items

 

On January 2, 2020, the Company announced that it had completed the sale of its Technical Packaging segment effective December 31, 2019 which resulted in $191 million of gross cash proceeds and $77 million, or $2.93 per share of net earnings from discontinued operations. Earnings from discontinued operations are excluded from Adjusted EBITDA and Adjusted EPS.

 

In Q4 2020, the Company completed its previously announced “Pension Plan Termination” and fully funded, terminated, and annuitized its defined benefit pension plan. Annuitizing this non-strategic liability through an insurance company removes equity market risk and interest rate volatility, reduces ongoing costs, and eliminates future cash payments. The termination resulted in a $41 million, or $1.55 per share non-cash charge, which is excluded from the calculation of Adjusted EBITDA and Adjusted EPS.

 

Additionally, the Company took cost reduction actions in Q4 2020 to lower its Aerospace & Defense (A&D) and Utility Solutions Group (USG) segments’ operating costs by reducing headcount, eliminating certain under-performing product lines, and reducing the footprint at a less-efficient manufacturing operation. As a result, the Company recognized $6 million, or $0.18 per share of discrete charges in Q4 2020 (total of $8 million, or $0.24 for the full year) which are excluded from the calculation of Adjusted EBITDA and Adjusted EPS in their respective periods. Certain additional period costs related to these items will be recognized in 2021.

 

Discontinued operations, the pension termination, and the cost reduction actions are collectively referred to as the “2020 Discrete Items” in the following discussion.

 

The financial results presented include certain non-GAAP financial measures such as EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS, as defined within the “Non-GAAP Financial Measures” described below. Any non-GAAP financial measures presented are reconciled to their respective GAAP equivalents.

 

Management believes these non-GAAP financial measures are useful in assessing the ongoing operational profitability of the Company’s business segments, and therefore, allow shareholders better visibility into the Company’s underlying operations. See “Non-GAAP Financial Measures” described below.

 

Subsequent Event – Acquisition

 

On October 22, 2020, the Company acquired Advanced Technology Machining, Inc. and its affiliate TECC Grinding, Inc. (collectively TECC and ATM referred to as “ATM”), small, privately held manufacturers of precision machined metal parts serving the aerospace, defense, and space industries. Located in Valencia, California near Crissair’s facility, ATM has a solid customer base supplying custom-designed parts widely used on defense and commercial aircraft, as well as missile and tank programs.

 

ATM will become part of Crissair in the A&D operating segment and has annual sales of approximately $7 million with EBITDA margin percentages in the high teens.

 

Vic Richey ESCO’s Chairman and CEO, commented, “ATM is a great addition to the Crissair portfolio of products, and I welcome the ATM team to ESCO, and look forward to growing their sales of high-quality products which serve the same end users in A&D that we serve today.”

 

 

 

Earnings Summary – Full Year

 

2020 GAAP EPS was $3.90 per share (GAAP net earnings of $102 million) and included the net earnings impact of the 2020 Discrete Items described above. Excluding the net earnings impact of the 2020 Discrete Items, 2020 Adjusted EPS was $2.76 per share.

 

2019 GAAP EPS was $3.10 per share (GAAP net earnings of $81 million) and included $0.15 per share from discontinued operations and other non-operating items described in prior releases. Excluding discontinued operations and other non-operating items, 2019 Adjusted EPS was $2.95 per share.

 

2020 Adjusted EBITDA was $137 million, compared to 2019 Adjusted EBITDA of $141 million.

 

Earnings Summary – Q4

 

Q4 2020 GAAP EPS was ($0.81) per share (GAAP net loss of $21 million) and included the quarterly impact of the 2020 Discrete Items. Excluding the net earnings impact of the 2020 Discrete Items, Q4 2020 Adjusted EPS was $0.90 per share.

 

Q4 2019 GAAP EPS was $0.95 per share (GAAP net earnings of $25 million) and included $0.07 per share from discontinued operations and other non-operating items described in prior releases. Excluding discontinued operations and other non-operating items, Q4 2019 Adjusted EPS was $1.02 per share.

 

Q4 2020 Adjusted EBITDA was $42 million, compared to Q4 2019 Adjusted EBITDA of $48 million.

 

Operating Highlights

 

·Net sales increased $7 million in 2020 to $733 million, compared to $726 million in 2019.

 

·A&D segment sales increased $29 million (9 percent) from 2019, including a $41 million increase in navy and space sales from Globe (full year contribution), Westland, and Vacco, partially offset by lower commercial aerospace sales due to COVID-19.

 

·Test sales were $187 million in 2020 compared to $188 million in 2019, driven by strong chamber project sales, offset by timing delays on certain installation projects due to COVID-19 related customer closure mandates and on-site personnel restrictions at customer locations.

 

·USG sales decreased $20 million in 2020 due to deferrals of various project deliverables as utility customers re-aligned their short-term maintenance and spending protocols to focus on uninterrupted power delivery due to COVID-19. Maintenance deferrals also reflect various mandates restricting on-site personnel at substations, large transformers and other customer locations. Q4 2020 sales were only down $2 million from Q4 2019 as USG began seeing some recovery in customer spending.

 

·SG&A expenses decreased $3 million in 2020 driven by cost mitigation programs implemented to help offset the negative sales impact from COVID-19, despite continued spending on R&D and new product development to enhance future growth.

 

·2020 non-cash amortization of intangible assets increased $3 million, or 18 percent, compared to 2019 as a result of the Globe acquisition.

 

 

 

·Interest expense decreased in 2020 due to the lower net debt outstanding.

 

·The effective income tax rate used for determining Adjusted EPS was approximately 18 percent in 2020 and 20 percent in 2019 as both periods were favorably impacted by tax reduction initiatives.

 

·Entered orders were $799 million in 2020 (book-to-bill of 1.09x) resulting in an ending backlog of $517 million at September 30, 2020, an increase of $66 million, or 15 percent, from September 30, 2019.

 

·2020 net cash provided by operating activities from continuing operations was $109 million, and included a $26 million cash payment to fund the pension plan termination completed in Q4 2020. Net debt (total borrowings, less cash on hand) was $10 million at September 30, 2020 reflecting a 0.47x leverage ratio.

 

Chairman’s Commentary

 

Vic Richey, Chairman and Chief Executive Officer, commented, “While 2020 was a clearly a challenging year, there are several highlights to touch on in this unprecedented period.

 

“The key highlight of 2020 was the strength of our cash generation, which was driven by the sale of our packaging business and our increased focus on working capital management to improve and increase our liquidity. We believe we will benefit from this strong liquidity position during 2021 as we continue our pursuit of acquisitions and expand our internal investments in new product development across the company.

 

“The performance of the Test segment in 2020 was also noteworthy as we increased our EBIT margin to 14.6 percent, up from 13.6 percent in 2019 despite flat sales. Our A&D segment demonstrated its resilience by delivering an EBIT margin of 21.1 percent despite a decrease in high-margin commercial aerospace sales. A&D’s solid margin was driven by its program, product and end-market diversity, as the navy and defense markets remained strong which offset the decline in commercial aerospace. PTI, Crissair and Mayday’s sales decline reflected the reduction in both OEM build rates and air traffic, while Globe, Vacco and Westland outperformed on their navy / submarine platforms.

 

“While we expect the softness in commercial aerospace deliveries to continue for the next few quarters, the commercial aerospace industry continues to see signs of a recovery emerging as several airlines are bringing more of their idled fleets back into service and daily aircraft passenger boarding has been increasing.

 

“The defense portion of A&D, both military aerospace and navy products, is expected to remain strong for the foreseeable future given its sizeable backlog coupled with the timing of expected platform deliveries.

 

“We expect Test to remain relatively solid given the strength of its served markets, primarily related to new communications technologies such as 5G and our growing shielding business. Our view of 5G’s future is favorable given the size of the investments being made by numerous large, global companies leading the development of this technology.

 

“USG sales remained soft over the second half of 2020 as utility customers continued deferring test equipment purchases and maintenance-related projects to focus their resources on issues such as critical power delivery. Given their ongoing travel and site access restrictions, Doble’s service business was largely on hold in the second half of the year while utilities tried to reduce personal safety risks.

 

 

 

“On the positive side, USG’s order pipeline was solid in 2020 with over $200 million in new orders received. A significant number of the orders at Doble related to cyber security solutions such as the DUCe, and I’m pleased to see the enthusiasm being generated in the market surrounding several new products and solutions recently introduced. We continue to see NRG’s end markets recovering as investments in renewable energy have been increasing in both wind and solar. Our new products supporting solar have been growing far better than anticipated and we expect that growth to continue.

 

“We expect Doble’s customer spending softness to continue for the next few quarters before returning to normal levels. We take comfort knowing that COVID-19 does not change the fundamentals of the global utility market as society needs reliable, safe and secure electricity. While customers can defer testing and maintenance for a period of time, they cannot do it indefinitely without significantly increasing the risk of catastrophic failure.

 

“Doble is using this temporary pause in the market to accelerate development of several new products and software solutions that we expect to introduce over the next several quarters.

 

“Wrapping up 2020, I’m pleased that we were able to generate substantial cash from operations and maintain our Adjusted EBITDA margin at 19 percent despite the lower contribution from our highest margin businesses.

 

“Given our solid financial condition, we plan to use a portion of our liquidity and debt capacity to fund future acquisitions and grow our business. We continue to evaluate a robust pipeline of M&A opportunities, but we are taking a particularly prudent and deliberate approach evaluating our near-term targets. As end-markets continue to settle down and more clarity appears in our targeted areas, we are comfortable adding to our current portfolio and capitalizing on today’s slightly lower valuations.

 

“Despite the recent economic challenges, we plan to continue our history of proven cost management and believe that we will benefit from our disciplined operating culture to minimize our risks going forward. We have positioned ourselves favorably from a cost structure standpoint entering 2021, and we anticipate a gradual return to a more normal operating environment. I continue to have a strong, favorable view of our future.”

 

Dividend Payment

 

The next quarterly cash dividend of $0.08 per share will be paid on January 19, 2021 to stockholders of record on January 4, 2021.

 

2021 Annual Meeting

 

The 2021 Annual Meeting of the Company’s Shareholders will be held on February 5, 2021.

 

Business Outlook – 2021 (COVID Uncertainty)

 

In mid-year 2020, business disruptions related to the pandemic started to affect the Company’s operations and continued throughout the balance of the year. Entering 2021, the commercial aerospace and utility end-markets are seeing some degree of customer stabilization, as well as notable pockets of recovery. However, there is still some uncertainty as to the timing and pace of the recovery in these areas.

 

 

 

The prospect of a viable COVID-19 vaccine will certainly benefit and accelerate the anticipated recovery of commercial air travel and utility spending with customers resuming normal testing protocols and equipment purchases, but Management determined it is best to take a “wait and see” approach for at least the next 90 days before resuming specific and finite guidance.

 

Given this uncertainty, it is difficult to predict how 2021 will be affected using our normal forecasting methodologies, therefore, the Company will continue the suspension of forward-looking guidance.

 

To assist shareholders and analysts, Management will offer “directional” guidance for 2021, by stating we are seeing tangible signs of recovery in the second half of fiscal 2021 that point to a solid outlook for the back half of the year.

 

Given the strength of the first half of 2020 pre-COVID, it is projected that the first half of 2021 will be a slightly lower comparison to 2020’s first half. The outlook for the second half of 2021 is expected to be a favorable comparison to the second half of 2020 given the tangible elements of recovery we are anticipating.

 

Management’s current expectations for the 2021 outlook show growth in Sales, Adjusted EBITDA, and Adjusted EPS compared to 2020, with Adjusted EBITDA and Adjusted EPS reasonably consistent with 2019.

 

Conference Call

 

The Company will host a conference call today, November 19th, at 4:00 p.m. Central Time, to discuss the Company’s 2020 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 on the Company’s website noted above or by phone (dial 1-855-859-2056 and enter the pass code 2765908).

 

Forward-Looking Statements

 

Statements in this press release regarding the future impacts of COVID-19, including the impact of a viable COVID-19 vaccine on the Company’s results, the financial success of the Company, the strength of its end markets, including without limitation, the slowdown in commercial aerospace and the timing of expected recovery, growth in the Company’s solar business, the outlook for the A&D, Test and USG segments, the ability to increase shareholder value, the success of acquisition efforts, internal investments in new products, 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 them except as may be required by applicable laws or regulations. 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 those described in Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, in Item 8.01 of the Company’s Form 8-K filed May 6, 2020, and the following: impacts arising from COVID-19 including without limitation labor shortages due to illness, shelter in place policies or quarantines, material shortages, transportation delays, delays or termination of Company contracts, the inability of our suppliers to perform, weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; inability to access work sites; competition; intellectual property rights; technical difficulties; delivery delays or defaults by customers; material changes in the costs and availability of certain raw materials; the appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts; the timing and content of future contract awards or customer orders; performance issues with key customers, suppliers and subcontractors; labor disputes; the impacts of natural disasters 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, taxation requirements, and new or modified tariffs; changes in interest rates; costs relating to environmental matters arising from current or former facilities; the availability of select acquisitions; and the uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration.

 

Non-GAAP Financial Measures

 

The financial measures EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are presented in this press release. The Company defines “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBITDA” as EBITDA excluding certain defined charges, and “Adjusted EPS” as GAAP earnings per share (EPS) excluding the net impact of the items described above which were $1.73 per share in Q4 2020 and $1.79 per share in 2020.

 

EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes that EBIT, EBITDA and Adjusted EBITDA are useful in assessing the operational profitability of the Company’s business segments because they exclude interest, taxes, depreciation and amortization, 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 presentation of EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS 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, Missouri: Manufactures highly-engineered filtration and fluid control products for the aviation, navy, space and process markets worldwide, as well as composite-based products and solutions for navy, defense and industrial customers; is the industry leader in RF shielding and EMC test products; and provides diagnostic instruments, software and services for the benefit of industrial power users and the electric utility and renewable energy industries. 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
Ended
September 30,
2020
  Three Months
Ended
September 30,
2019
 
Net Sales $208,030   213,177 
Cost and Expenses:        
Cost of sales  129,763   126,961 
Selling, general and administrative expenses  40,467   43,641 
Amortization of intangible assets  5,247   5,276 
Interest expense  1,466   2,506 
Pension plan termination charge  40,600   - 
Other expenses, net  6,948   4,201 
Total costs and expenses  224,491   182,585 
         
(Loss) earnings before income taxes  (16,461)  30,592 
Income tax expense  5,347   7,319 
         
(Loss) earnings from continuing operations  (21,808)  23,273 
         
Earnings from discontinued operations, net of tax (benefit)        
expense of $(502) and $535, respectively  502   1,585 
         
Net earnings $(21,306)  24,858 
         
Diluted EPS:        
Diluted - GAAP        
Continuing operations $(0.83)  0.89 
Discontinued operations  0.02   0.06 
Net earnings $(0.81)  0.95 
         
Diluted - As Adjusted Basis        
Continuing operations  $0.90(1)  1.02(2)
         
Diluted average common shares O/S:  26,163   26,146 

 

(1)Q4 FY 20 Adjusted EPS excludes $1.55 per share of charges related to the pension plan termination and $0.18 per share of charges incurred within the USG and A&D segments due to facility consolidation, asset impairment and severance charges in the fourth quarter of FY 20.
         
(2)Q4 FY 19 Adjusted EPS excludes $0.13 per share net impact of purchase accounting charges related to the Globe acquisition and restructuring charges incurred primarily at Doble, PTI and VACCO during the fourth quarter of FY 19.

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except per share amounts)

 

  Year Ended
September 30,
2020
  Year Ended
September 30,
2019
 
Net Sales $732,915   726,044 
Cost and Expenses:        
Cost of sales  457,418   437,998 
Selling, general and administrative expenses  159,490   162,734 
Amortization of intangible assets  21,812   18,492 
Interest expense  6,730   8,092 
Pension plan termination charge  40,600   - 
Other expenses, net  7,122   851 
Total costs and expenses  693,172   628,167 
         
Earnings before income taxes  39,743   97,877 
Income tax expense  14,278   20,388 
         
Earnings from continuing operations  25,465   77,489 
         
(Loss) earnings from discontinued operations, net        
of tax expense of $269 and $789  (601)  3,550 
Gain on sale of discontinued operations, net of tax        
expense of $23,232  77,116   - 
Earnings from discontinued operations  76,515   3,550 
         
Net earnings $101,980   81,039 
         
Diluted EPS:        
Diluted - GAAP        
Continuing operations $0.97   2.97 
Discontinued operations  2.93   0.13 
Net earnings $3.90   3.10 
         
Diluted - As Adjusted Basis        
Continuing operations  $2.76(1)  2.95(2)
         
Diluted average common shares O/S:  26,135   26,097 

 

(1)FY20 Adjusted EPS excludes $1.55 per share of charges related to the pension plan termination and $0.24 per share of charges within the USG and A&D segments related to facility consolidation, asset impairment, severance charges, and the incremental costs associated with COVID-19.
         
(2)FY 19 Adjusted EPS excludes $0.02 per share of after-tax income mainly resulting from the gain on the sale of the Doble Watertown property partially offset by certain restructuring charges primarily at Doble, PTI & VACCO.

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

 

  GAAP  As Adjusted 
  Q4 2020  Q4 2019  Q4 2020  Q4 2019 
Net  Sales                
Aerospace & Defense $97,613   96,966   97,613   96,966 
USG  52,524   54,276   52,524   54,276 
Test  57,893   61,935   57,893   61,935 
Totals $208,030   213,177   208,030   213,177 
                 
EBIT                
Aerospace & Defense $21,555   23,050   22,075   23,459 
USG  4,058   11,708   9,884   12,715 
Test  9,718   10,849   9,718   10,849 
Corporate  (50,326)  (12,509)  (9,718)  (9,349)
Consolidated EBIT  (14,995)  33,098   31,959   37,674 
Less: Interest expense  (1,466)  (2,506)  (1,466)  (2,506)
Less: Income tax expense  (5,347)  (7,319)  (6,872)  (8,386)
Net (loss) earnings from cont ops $(21,808)  23,273   23,621   26,782 

 

Note 1: Adjusted net earnings were $23.6 million in Q4 20 which excluded $40.6 million (or $1.55 per share) net impact related to the pension plan termination and $6.3 million (or $0.18 per share) of pretax charges incurred within the USG and A&D segments due to facility consolidation, asset impairment and severance charges in the fourth quarter of FY 20.
            
Note 2: Adjusted net earnings were $26.8 million in Q4 19 which excluded $3.5 million (or $0.13 per share) net impact of the purchase accounting charges related to the Globe acquisition and the restructuring charges incurred at Doble, PTI and VACCO during the fourth quarter of FY 19.

 

EBITDA Reconciliation to Net earnings:       Adjusted  Adjusted 
  Q4 2020  Q4 2019  Q4 2020  Q4 2019 
Consolidated EBITDA $(4,723)  43,291   42,231   47,867 
Less: Depr & Amort  (10,272)  (10,193)  (10,272)  (10,193)
Consolidated EBIT  (14,995)  33,098   31,959   37,674 
Less: Interest expense  (1,466)  (2,506)  (1,466)  (2,506)
Less: Income tax expense  (5,347)  (7,319)  (6,872)  (8,386)
Net (loss) earnings from cont ops $(21,808)  23,273   23,621   26,782 

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES

Condensed Business Segment Information (Unaudited)

(Dollars in thousands)

 

  GAAP  As Adjusted 
  FY 2020  FY 2019  FY 2020  FY 2019 
Net  Sales                
Aerospace & Defense $354,320   325,735   354,320   325,735 
USG  191,703   211,915   191,703   211,915 
Test  186,892   188,394   186,892   188,394 
Totals $732,915   726,044   732,915   726,044 
                 
EBIT                
Aerospace & Defense $73,213   70,142   74,618   71,316 
USG  24,368   52,169   30,974   46,282 
Test  27,201   25,640   27,270   25,640 
Corporate  (78,309)  (41,982)  (37,510)  (38,153)
Consolidated EBIT  46,473   105,969   95,352   105,085 
Less: Interest expense  (6,730)  (8,092)  (6,730)  (8,092)
Less: Income tax expense  (14,278)  (20,388)  (16,265)  (19,903)
Net earnings from cont ops $25,465   77,489   72,357   77,090 

 

Note 1: Adjusted net earnings were $72.4 million in FY 20 which excluded $40.6 million (or $1.55 per share) net impact related to the pension plan termination and $8.3 million (or $0.24 per share) of pretax charges within the USG and A&D segments related to facility consolidation, asset impairment, severance charges, and the incremental costs associated with COVID-19.
            
Note 2: Adjusted net earnings were $77.1 million in FY 19 which excluded $0.4 million (or $0.02 per share) of after-tax income mainly resulting from the gain on the sale of the Doble Watertown property partially offset by certain restructuring charges at Doble, PTI & VACCO.

 

EBITDA Reconciliation to Net earnings:    Adjusted  Adjusted 
  FY 2020  FY 2019  FY 2020  FY 2019 
Consolidated EBITDA $87,811   141,964   136,690   141,080 
Less: Depr & Amort  (41,338)  (35,995)  (41,338)  (35,995)
Consolidated EBIT  46,473   105,969   95,352   105,085 
Less: Interest expense  (6,730)  (8,092)  (6,730)  (8,092)
Less: Income tax expense  (14,278)  (20,388)  (16,265)  (19,903)
Net earnings from cont ops $25,465   77,489   72,357   77,090 

 

 

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
  September 30,
2020
  September 30,
2019
 
Assets        
Cash and cash equivalents $52,560   61,808 
Accounts receivable, net  144,082   158,715 
Contract assets  96,746   110,211 
Inventories  136,189   124,956 
Other current assets  17,053   14,190 
Assets of discontinued operations-current  -   25,314 
Total current assets  446,630   495,194 
Property, plant and equipment, net  139,870   127,843 
Intangible assets, net  346,632   381,605 
Goodwill  408,063   390,256 
Operating lease assets  21,390   - 
Other assets  10,938   4,445 
Assets of discontinued operations-other  -   67,377 
  $1,373,523   1,466,720 
         
Liabilities and Shareholders' Equity        
Current maturities of long-term debt & short-term borrowings $22,368   20,000 
Accounts payable  50,525   63,800 
Contract liabilities  100,551   81,177 
Other current liabilities  82,585  ��75,141 
Liabilities of discontinued operations-current  -   11,517 
Total current liabilities  256,029   251,635 
Deferred tax liabilities  60,938   60,856 
Non-current operating lease liabilities  16,785   - 
Other liabilities  38,176   59,008 
Long-term debt  40,000   265,000 
Liabilities of discontinued operations-other  -   3,999 
Shareholders' equity  961,595   826,222 
  $1,373,523   1,466,720 

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
 
  Year Ended
September 30,
2020
 
Cash flows from operating activities:    
Net earnings $101,980 
Earnings from discontinued operations  (76,515)
Adjustments to reconcile net earnings to net cash    
provided by operating activities:    
Depreciation and amortization  41,338 
Stock compensation expense  5,550 
Changes in assets and liabilities  23,793 
Effect of deferred taxes  (2,562)
Pension contributions related to terminated pension plan  (25,650)
Pension plan termination charge  40,600 
Net cash provided by operating activities - continuing operations  108,534 
Net cash used by operating activities - discontinued operations  (26,254)
Net cash provided by operating activities  82,280 
     
Cash flows from investing activities:    
Capital expenditures  (32,108)
Additions to capitalized software  (9,023)
Net cash used by investing activities - continuing operations  (41,131)
Proceeds from sale of discontinued operations  183,812 
Capital expenditures - discontinued operations  (1,728)
Net cash provided by investing activities - discontinued operations  182,084 
Net cash provided by investing activities  140,953 
     
Cash flows from financing activities:    
Proceeds from long-term debt and short-term borrowings  12,368 
Principal payments on long-term debt  (235,000)
Dividends paid  (8,323)
Other  (3,125)
Net cash used by financing activities - continuing operations  (234,080)
Net cash used by financing activities - discontinued operations  (2,140)
Net cash used by financing activities  (236,220)
     
Effect of exchange rate changes on cash and cash equivalents  3,739 
     
Net decrease in cash and cash equivalents  (9,248)
Cash and cash equivalents, beginning of period  61,808 
Cash and cash equivalents, end of period $52,560 

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data (Unaudited)  -- Continuing Operations Basis
(Dollars in thousands)
 
Backlog And Entered Orders - Q4 FY 2020 Aerospace
 & Defense
  Test  USG  Total 
Beginning Backlog - 7/1/20 $370,429   126,410   53,709   550,548 
Entered Orders  71,845   53,515   49,503   174,863 
Sales  (97,613)  (57,893)  (52,524)  (208,030)
Ending Backlog - 9/30/20 $344,661   122,032   50,688   517,381 

 

Backlog And Entered Orders - FY 2020 Aerospace
 & Defense
  Test  USG  Total 
Beginning Backlog - 10/1/19 $276,273   133,571   41,715   451,559 
Entered Orders  422,708   175,353   200,676   798,737 
Sales  (354,320)  (186,892)  (191,703)  (732,915)
Ending Backlog - 9/30/20 $344,661   122,032   50,688   517,381 

 

 

 

 

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Unaudited)
 
EPS – Adjusted Basis Reconciliation – Q4 FY 20    
EPS from Continuing Ops – GAAP Basis – Q4 FY 20 $(0.83)
Adjustments (defined below)  1.73 
EPS from Continuing Ops – As Adjusted Basis – Q4 FY 20 $0.90 
     
Adjustments consist of $1.55 per share related to the pension plan termination and $0.18 per share of restructuring charges within the USG and A&D segments due to facility consolidation, asset impairment and severance charges in Q4 FY 20.    
(The $1.73 per share of EPS adjustments consists of $46.9 million of pre-tax charges offset by $1.5 million of tax benefit for net impact of $45.4 million.)    
     
EPS – Adjusted Basis Reconciliation – FY 20    
EPS from Continuing Ops – GAAP Basis – FY 20 $0.97 
Adjustments (defined below)  1.79 
EPS from Continuing Ops – As Adjusted Basis – FY 20 $2.76 
     
Adjustments consist of $1.55 per share related to the pension plan termination and $0.24 per share of restructuring charges within the USG and A&D segments due to facility consolidation, asset impairment, severance and incremental costs associated with COVID-19 in FY 20.    
(The $1.79 per share of EPS adjustments consists of $48.9 million of pre-tax charges offset by $2 million of tax benefit for net impact of $46.9 million.)    
     
EPS – Adjusted Basis Reconciliation – Q4 FY 19    
EPS from Continuing Ops – GAAP Basis – Q4 FY 19 $0.89 
Adjustments (defined below)  0.13 
EPS from Continuing Ops – As Adjusted Basis – Q4 FY 19 $1.02 
     
Adjustments consist of $0.13 per share net impact of the purchase accounting charges related to the Globe acquisition and the restructuring charges related to Doble, PTI, & VACCO during Q4 FY 19.    
(The $0.13 per share of EPS adjustments consists of $4.6 million of pre-tax charges offset by $1.1 million of tax benefit for net impact of $3.5 million.)    
     
EPS – Adjusted Basis Reconciliation – FY 19    
EPS from Continuing Ops – GAAP Basis – FY 19 $2.97 
Adjustments (defined below)  (0.02)
EPS from Continuing Ops – As Adjusted Basis – FY 19 $2.95 
     
Adjustments consist of $0.02 per share net impact of income related to the gain on sale of the Doble Watertown property partially offset by certain restructuring charges at Doble, PTI & VACCO in FY 19.    
(The $0.02 per share of EPS adjustments consists of $0.9 million of pre-tax income offset by $0.5 million of tax expense for net impact of $0.4 million.)