ESE
$84.64
Esco Technologies
($.62)
(.73%)
Earnings Details
3rd Quarter June 2021
Monday, August 09, 2021 4:15:00 PM
Tweet Share Watch
Summary

ESCO Guides Below Estimates

Esco Technologies (ESE) reported 3rd Quarter June 2021 earnings of $0.67 per share on revenue of $181.4 million. on revenue of $192.3 million. Revenue grew 5.1% on a year-over-year basis.

The company said it expects fourth quarter non-GAAP earnings of $0.73 to $0.78 per share. The current consensus earnings estimate is $1.08 per share for the quarter ending September 30, 2021.

ESCO Technologies Inc designs and manufactures specialty filtration products including hydraulic filter elements and fluid control devices used in commercial aerospace applications, filter mechanisms used in micro-propulsion devices for satellites.

Results
Reported Earnings
$0.67
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$181.4 Mil
Revenue Estimate
$192.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

ESCO Announces Third Quarter Fiscal 2021 Results

St. Louis, Aug. 09, 2021 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the third quarter and nine months ended June 30, 2021 (Q3 2021 and YTD 2021) compared to the third quarter and nine months ended June 30, 2020 (Q3 2020 and YTD 2020).

Vic Richey, Chairman and Chief Executive Officer, commented, “Our dedicated team continues to successfully manage through the impacts of the COVID-19 global pandemic. Our liquidity and end-market diversity have helped provide stability in our operating results as we have navigated through this challenging time. Our commitment to improving working capital management, cost reduction activities, and new product development has us well-positioned for profitable growth as our end-markets continue to recover.

“At the beginning of this fiscal year, we stated that with the strength of the first half of fiscal 2020 (pre-COVID), we projected the first half of fiscal 2021 to be slightly lower in comparison to 2020, and that we expected the second half of 2021 to be a favorable comparison to the prior year given our expectation of tangible elements of recovery.   Due to our focus on effective cost management and program execution, our first half Adjusted EPS and Adjusted EBITDA exceeded the prior year on lower revenue (as presented in our May 4, 2021 earnings release for Q2 and the first half of 2021).   In Q3, we began to see positive signs of the start of longer term recovery across our end-markets most affected by COVID. Q3 entered orders were up $46 million (29 percent) over the prior year Q3 to over $200 million, with growth in commercial and military aerospace, Navy, space, electric utility and renewable energy. Sales increased 5 percent over the prior year with all three business segments posting higher sales for the quarter. We will continue our focus on optimizing our cost structure, driving working capital improvement, and investing in the business to deliver profitable growth going forward.”

Discrete Items

During Q3 2021, the Company incurred $2.7 million ($0.10 per share) consisting of after-tax charges at Corporate due to one-time compensation costs related to management transition and acquisition costs ($0.09 per share), and charges related to the USG (Morgan Schaffer) facility move ($0.01 per share). These costs are excluded from the calculation of Q3 2021 Adjusted EBITDA and Adjusted EPS.

YTD 2021, the Company has incurred $2.8 million ($0.10 per share) consisting of after-tax charges at Corporate due to one-time compensation and acquisition costs ($0.10 per share), an ATM acquisition inventory step-up charge ($.01 per share), and charges related to USG (Manta and Morgan Schaffer) facility consolidations ($0.05 per share), partially offset by the final settlement from the sale of the Doble Watertown facility ($0.06 gain per share). These costs are excluded from the calculation of Q3 2021 YTD Adjusted EBITDA and Adjusted EPS.

During Q3 2020, the Company incurred $0.9 million ($0.04 per share) of after-tax charges primarily related to incremental costs associated with COVID-19. These costs are excluded from the calculation of Q3 2020 Adjusted EBITDA and Adjusted EPS.

In the first nine months of 2020, the Company incurred $1.5 million ($0.06 per share) of after-tax charges primarily related to incremental costs associated with COVID-19 ($0.04 per share) and charges related to the move of the Doble headquarters facility ($.02 per share). In addition, during Q1 2020, the company completed the sale of its Technical Packaging segment which resulted in gross cash proceeds of $191 million and a net gain on the sale of $77 million, or $2.91 per share, which is recorded as discontinued operations.

The financial results presented include certain non-GAAP financial measures such as Adjusted SG&A, EBIT, Adjusted 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.

Earnings Summary

Q3 2021 GAAP EPS was $0.57 per share (GAAP net earnings of $14.9 million) and included the net earnings impact of the Q3 2021 Discrete Items described above. Excluding the net earnings impact of the Discrete Items, Q3 2021 Adjusted EPS was $0.67 per share. In the third quarter, the Company’s P&L was negatively impacted by approximately $2.1 million driven by new product development challenges, increased production costs, and product quality issues at our Westland Technologies subsidiary, within our A&D segment. We have already taken a number of steps to correct production issues and reduce costs throughout the operation. Westland will continue to be an important part of the overall A&D group and we are actively exploring additional opportunities for synergies with our Globe operating unit.

YTD 2021 GAAP EPS was $1.65 per share (GAAP net earnings of $43.1 million) and included the net earnings impact of the YTD 2021 Discrete Items described above. Excluding the net earnings impact of the Discrete Items, YTD 2021 Adjusted EPS was $1.75 per share. During the third quarter of 2021, the Company identified $2.3 million out of period pretax adjustments to our previously reported YTD P&L related to the Westland operating issues described above. Of this amount, $1.1 million and $1.2 million related to the first and second quarters of 2021, respectively. We have restated our discussion of GAAP and As Adjusted results for YTD 2021 to reflect the correction of these items in the proper periods. On a prospective basis, interim period consolidated financial statements will be updated to reflect these corrections and we have provided disclosures for these items in our interim financial statements.

Q3 2020 GAAP EPS was $0.72 per share (GAAP net earnings of $18.7 million) and included $0.04 per share from the Discrete Items noted above. Excluding the net earnings impact of the Discrete Items, Q3 2020 Adjusted EPS was $0.76 per share.

YTD 2020 GAAP EPS from Continuing Operations was $1.81 per share (GAAP net earnings from Continuing Operations of $47.3 million) and included $0.06 per share from the Discrete Items noted above. Excluding the net earnings impact of the Discrete Items, YTD 2020 Adjusted EPS from Continuing Operations was $1.87 per share.

Operating Highlights – Q3 & YTD

  • Sales increased $8 million (5 percent) to $181 million in Q3 2021, compared to $173 million in Q3 2020.   YTD 2021 sales decreased $15 million (3 percent) to $510 million, compared to $525 million YTD 2020.
  • Gross margin percentage decreased to 37.4 percent in Q3 2021 from 37.6 percent in Q3 2020, due to the previously discussed issues at Westland, largely offset by the implementation of cost reduction actions across the company. YTD 2021 gross margin percentage increased to 37.9 percent from 37.6 percent in YTD 2020.
  • Adjusted SG&A expenses increased by $4.2 million in Q3 2021 compared to Q3 2020 due to overall lower operating expenses in the prior year related to COVID and the moderate return of travel and other expenses in 2021.   Adjusted YTD 2021 SG&A expenses increased by $1.5 million compared to YTD 2020 due to the above, partially offset by lower spending (headcount, travel and pension) in the first half of the year.
  • Interest expense decreased $1.0 million in Q3 2021 and $3.8 million YTD 2021 compared to the prior year due to lower debt outstanding and lower average interest rates.
  • The effective income tax rate increased to 21.3 percent in Q3 2021 from 14.3 percent in Q3 2020. The significantly lower tax rate in Q3 2020 reflected the favorable impact ($0.06 per share) of certain one-time tax strategies implemented in the prior year which were not repeated.
  • Q3 2021 Entered orders were $204 million (book-to-bill of 1.12x). YTD entered orders are $538 million (book-to-bill of 1.05x), and backlog has increased in all three business segments year-to-date.
  • YTD 2021 net cash provided by operating activities was $75 million, resulting in a net cash position (total cash on hand, less total borrowings) of $30 million and a 0.43x leverage ratio at June 30, 2021.

Segment Performance

A&D

  • Sales increased $2 million (2 percent) to $86 million in Q3 2021 from $84 million in Q3 2020, due to higher Navy sales partially offset by lower commercial aerospace sales. While commercial aerospace weakness is continuing, increased U.S domestic passenger boardings and recent orders for new planes by major airlines are encouraging signs for 2022.
  • Adjusted EBIT decreased $1.5 million in Q3 2021 to $16.7 million from $18.2 million in Q3 2020, with a 20 percent Adjusted EBIT margin, as the Westland issues and continued softness in the commercial aerospace market were partially offset by higher contribution from Navy programs.
  • Entered Orders were $95 million in Q3 2021 (book-to-bill of 1.11) compared to $66 million in Q3 2020. With continued strength in Navy and space, and solid order growth in commercial aerospace, overall A&D orders increased $29 million (44 percent) in Q3.

USG

  • Sales increased $5 million (12 percent) to $48 million in Q3 2021 from $43 million in Q3 2020. Doble sales increased $3 million (8 percent), driven by growth from utility customers, although overall demand has not returned to pre-COVID levels. NRG sales increased $2 million (37 percent) with significant momentum in both wind and solar.
  • Adjusted EBIT increased $2.4 million in Q3 2021 to $8.7 million from $6.3 million in Q3 2020, with an 18 percent EBIT margin versus 15 percent in the prior year.   The profitability increase was driven by leverage on sales growth and favorable impacts from prior cost reductions.
  • Entered Orders were $55 million in Q3 2021 (book-to-bill of 1.16) compared to $50 million in Q3 2020.   Despite some continued deferrals of maintenance and test equipment purchases, electric utility orders were up $2 million (5 percent) and renewables orders were up $3 million (49 percent) over the prior year with significant growth in both solar and wind.

Test

  • Sales increased $2 million (5 percent) to $48 million in Q3 2021 from $46 million in Q3 2020, due to strength in the Americas and Europe partially offset by lower sales in Asia.
  • EBIT decreased $0.4 million in Q3 2021 to $6.8 million (compared to $7.2 million in Q3 2020), with a 14 percent EBIT margin. A strong quarter of sales with favorable mix in Asia drove the higher margin in the prior year.
  • Entered Orders were $53 million in Q3 2021 (book-to-bill of 1.11) compared to $41 million in Q3 2020. The $12 million (28 percent) increase was primarily driven by strength in Asia and sets a strong backlog for Q4 and fiscal 2022.

Summary Commentary

Despite the continuing COVID related challenges, our Q3 sales and entered orders increased both sequentially and year-over-year across all three business segments.   From a margin perspective, Q3 Adjusted EBITDA margin decreased to 18.2 percent from 20.3 percent in the prior year, primarily related to the Westland issues in the quarter, the return of travel and other spending in 2021, and lower operating expenses in 2020 related to COVID.   Due to our persistent focus on cost management, YTD Adjusted EBITDA margins are in line with both 2020 and pre-COVID 2019 levels, giving us confidence in our ability to drive margin improvement as long-term revenue growth returns in our more challenged end-markets.

Driven by our continuing focus on working capital management and cash conversion, our cash flow from operations is up $22 million YTD over the prior year. With a leverage ratio of .43x and almost $700 million in liquidity, we remain well-positioned to fund capital investments, new product development, and the pursuit of acquisition opportunities. We continue to evaluate a solid pipeline of M&A opportunities with the intent to further expand our product portfolio by adding complimentary businesses that increase shareholder value.

Vic Richey, Chairman and Chief Executive Officer, commented, “I want to thank our entire team for their continuing commitment and efforts during the unprecedented challenges of 2020 and 2021. Despite the challenges of the quarter and the lingering effects of COVID in the aerospace and electric utility markets, we delivered revenue growth and solid profitability and cash flow in the quarter. I am confident that we have positioned the company for profitable growth as our end-markets return to a more normal operating environment moving into 2022.”

New Share Repurchase Program

On August 5, 2021, the Company’s Board of Directors adopted a new stock repurchase program, replacing the previous program which was adopted in 2012 and was scheduled to expire September 30, 2021.  Under the new program, which is similar to the previous one, Management may repurchase shares of its outstanding stock in the open market and otherwise throughout the period ending September 30, 2024. The total value authorized is $200 million.

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on October 15, 2021 to stockholders of record on October 1, 2021.

Business Outlook – 2021

Throughout the first nine months of 2021, our Navy, defense aerospace, space and Test segment end-markets have remained solid and now we are beginning to see recovery in our core markets most affected by the pandemic. We are encouraged by the growing strength of our entered orders across the commercial aerospace, electric utility and renewable energy end-markets and our Q3 revenue growth in all three business segments. While there is still uncertainty as to the timing and pace of the recovery in the commercial aerospace and electric utility markets, we believe we now have a clearer picture of the near term and will resume issuing quarterly guidance.

While we did see good order input and sales growth for all three segments in Q3, the level of activity is somewhat lower than anticipated in the commercial aerospace and utility markets. Backlog is building to support significant improvement in fiscal 2022. Our expectation is for solid Q4 growth in sales, Adjusted EBITDA, and Adjusted EPS as compared to Q3 2021. However, with the recovery of commercial aerospace still in the early stages, we do not anticipate the level of revenue strength we typically see in our fourth quarter. Our expectation is for Q4 Adjusted EPS to be in the range of $0.73 to $0.78 per share. This outlook excludes the impact from acquisitions that have closed in Q4. Please see the separate press release issued today for information regarding two acquisitions that were closed in the USG business segment.   These acquisitions are expected to provide an additional boost to core growth in 2022.

Conference Call

The Company will host a conference call today, August 9, at 4:00 p.m. Central Time, to discuss the Company’s Q3 2021 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 2782855).

Forward-Looking Statements

Statements in this press release regarding the timing and magnitude of recovery in the Company’s end markets, the continuing impacts of COVID-19 on the Company’s results, sales, Adjusted SG&A, Adjusted EBIT, Adjusted EBITDA, Adjusted EPS, cash flow, results of cost reduction efforts, margins, growth, the financial success of the Company, the strength of its end markets, the outlook for the A&D, Test and USG segments, the ability to increase shareholder value, the timing and success of acquisition efforts, internal investments in new products and solutions, the correction of production issues, the effect of certain changes in the Company’s internal controls or in other factors on the effectiveness of its internal controls, 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, 2020; the availability and acceptance of viable COVID-19 vaccines by enough of the U.S. and world’s population to curtail the pandemic; the continuing impact of the COVID-19 pandemic and the effects of known or unknown COVID-19 variants including labor shortages, facility closures, shelter in place policies or quarantines, material shortages, transportation delays, termination or delays of Company contracts, and the inability of our suppliers or customers to perform; the impacts of natural disasters on the Company’s operations and those of the Company’s customers and suppliers; the timing and content of future contract awards or customer orders; the appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts or orders; weakening of economic conditions in served markets; the success of the Company’s competitors; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; the success of the Company’s acquisition efforts; delivery delays or defaults by customers; performance issues with key customers, suppliers and subcontractors; material changes in the costs and availability of certain raw materials; labor disputes; changes in U.S. tax laws and regulations; other changes in laws and regulations including but not limited to changes in accounting standards and foreign taxation; changes in interest rates; costs relating to environmental matters arising from current or former facilities; uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration; and the integration of recently acquired businesses.

Non-GAAP Financial Measures

The financial measures Adjusted SG&A, EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are presented in this press release. The Company defines “Adjusted SG&A” as the corresponding GAAP amounts excluding the net impact of the items described above in Discrete Items and reconciled in the attached Reconciliation of Non-GAAP Financial Measures, “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBIT” and “Adjusted EBITDA” as excluding the net impact of the items described above in Discrete Items, and “Adjusted EPS” as GAAP earnings per share (EPS) excluding the net impact of the items described above which were ($0.10) per share in Q3 2021.

Adjusted SG&A, EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes that Adjusted SG&A is useful in assessing the operational profitability of the Company as it excludes certain one-time charges. Management believes EBIT, Adjusted 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 Adjusted SG&A, EBIT, Adjusted 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
June 30, 2021
 Three Months
Ended
June 30, 2020
 
         
Net Sales$181,394 172,665  
Cost and Expenses:     
 Cost of sales 113,610 107,686  
 Selling, general and administrative expenses 42,882 36,936  
 Amortization of intangible assets 4,864 5,535  
 Interest expense 480 1,523  
 Other (income) expenses, net 615 (824) 
  Total costs and expenses 162,451 150,856  
         
Earnings before income taxes 18,943 21,809  
Income tax expense 4,034 3,122  
         
  Net earnings$14,909 18,687  
         
  Diluted EPS:     
  Diluted - GAAP     
   Net earnings$0.57 0.72  
         
  Diluted - As Adjusted Basis     
   Continuing operations$0.67(1)0.76 (2)
         
  Diluted average common shares O/S: 26,214 26,134  
         
(1)Q3 2021 Adjusted EPS excludes $0.10 per share consisting of after-tax charges incurred at Corporate due to one-time compensation costs related to management transition and acquisition costs, and charges related to the USG (Morgan Schaffer) facility move.
         
(2)Q3 2020 Adjusted EPS excludes $0.04 per share of after-tax charges primarily related to incremental costs associated with COVID-19.

   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES 
Condensed Consolidated Statements of Operations (Unaudited) 
(Dollars in thousands, except per share amounts) 
   
     Nine Months
Ended
June 30, 2021
 Nine Months
Ended
June 30, 2020
 
         
Net Sales$509,962  524,885  
Cost and Expenses:     
 Cost of sales 316,785  327,655  
 Selling, general and administrative expenses 122,628  119,023  
 Amortization of intangible assets 14,729  16,565  
 Interest expense 1,453  5,264  
 Other (income) expenses, net (1,265) 174  
  Total costs and expenses 454,330  468,681  
         
Earnings before income taxes 55,632  56,204  
Income tax expense 12,501  8,931  
         
  Earnings from continuing operations 43,131  47,273  
         
(Loss) earnings from discontinued operations, net of tax    
 expense of $269 -  (601) 
Gain on sale of discontinued operations, net of     
 tax expense of $23,734 -  76,614  
         
  Earnings from discontinued operations -  76,013  
         
  Net earnings$43,131  123,286  
         
  Diluted EPS:     
  Diluted - GAAP     
   Continuing operations$1.65  1.81  
   Discontinued operations 0.00  2.91  
   Net earnings$1.65  4.72  
         
  Diluted - As Adjusted Basis     
   Continuing operations$1.75 (1)1.87 (2)
         
  Diluted average common shares O/S: 26,199  26,130  
         
(1)YTD Q3 2021 Adjusted EPS excludes $0.10 per share consisting of after-tax charges incurred at Corporate due to one-time compensation costs related to management transition and acquisition costs, an ATM acquisition inventory step-up charge, and charges related to the USG (Doble Manta & Morgan Schaffer) facility consolidations, partially offset by the final settlement from the sale of the Doble Watertown facility.
         
(2)YTD Q3 2020 Adjusted EPS excludes $0.06 per share of after-tax charges primarily related to incremental costs associated with COVID-19 and charges related to the move of the Doble headquarters facility.

   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
   
    GAAP As Adjusted 
    Q3 2021 Q3 2020 Q3 2021 Q3 2020 
Net Sales          
 Aerospace & Defense$85,576  84,072  85,576  84,072  
 USG 47,704  42,577  47,704  42,577  
 Test 48,114  46,016  48,114  46,016  
  Totals$181,394  172,665  181,394  172,665  
            
EBIT          
 Aerospace & Defense$16,714  17,409  16,739  18,224  
 USG 8,227  6,156  8,710  6,316  
 Test 6,751  7,177  6,751  7,246  
 Corporate (12,269) (7,410) (9,246) (7,219) 
  Consolidated EBIT 19,423  23,332  22,954  24,567  
  Less: Interest expense (480) (1,523) (480) (1,523) 
  Less: Income tax expense (4,034) (3,122) (4,846) (3,418) 
  Net earnings from cont ops$14,909  18,687  17,628  19,626  
               
Note 1: Adjusted net earnings were $17.6 million in Q3 2021 which excluded $0.10 per share consisting of after-tax charges incurred at Corporate due to one-time compensation costs related to management transition and acquisition costs, and charges related to the USG (Morgan Schaffer) facility move.
            
Note 2: Adjusted net earnings were $19.6 million in Q3 2020 which excluded $0.04 per share primarily related to incremental costs associated with COVID-19.
            
EBITDA Reconciliation to Net earnings from continuing operations:   
        Adjusted Adjusted 
    Q3 2021 Q3 2020 Q3 2021 Q3 2020 
Consolidated EBITDA$29,567  33,815  33,098  35,050  
Less: Depr & Amort (10,144) (10,483) (10,144) (10,483) 
Consolidated EBIT 19,423  23,332  22,954  24,567  
Less: Interest expense (480) (1,523) (480) (1,523) 
Less: Income tax expense (4,034) (3,122) (4,846) (3,418) 
Net earnings from cont ops$14,909  18,687  17,628  19,626  
            

      

   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
   
    GAAP As Adjusted 
    YTD Q3 YTD Q3 YTD Q3 YTD Q3 
        2021       2020       2021       2020  
Net Sales          
 Aerospace & Defense$234,720  256,707  234,720  256,707  
 USG 141,799  139,179  141,799  139,179  
 Test 133,443  128,999  133,443  128,999  
  Totals$509,962  524,885  509,962  524,885  
            
EBIT          
 Aerospace & Defense$41,980  51,658  42,365  52,543  
 USG 27,683  20,310  27,552  21,090  
 Test 17,781  17,483  17,781  17,552  
 Corporate (30,359) (27,983) (26,986) (27,792) 
  Consolidated EBIT 57,085  61,468  60,712  63,393  
  Less: Interest expense (1,453) (5,264) (1,453) (5,264) 
  Less: Income tax (12,501) (8,931) (13,335) (9,393) 
  Net earnings from cont ops$43,131  47,273  45,924  48,736  
               
Note 1: Adjusted net earnings were $45.9 million YTD Q3 2021 which excluded $0.10 per share consisting of after-tax charges incurred at Corporate due to one-time compensation costs related to management transition and acquisition costs, an ATM acquisition inventory step-up charge, and charges related to USG (Manta and Morgan Schaffer) facility consolidations, partially offset by the final settlement from the sale of the Doble Watertown facility.
            
Note 2: Adjusted net earnings were $48.7 million in YTD Q3 2020 which excluded $0.06 per share primarily related to incremental costs associated with COVID-19 and charges related to the move of the Doble headquarters facility.
            
EBITDA Reconciliation to Net earnings from continuing operations:     
        Adjusted Adjusted 
    YTD Q3 YTD Q3 YTD Q3 YTD Q3 
         2021       2020       2021       2020  
Consolidated EBITDA$87,344  92,534  90,971  94,459  
Less: Depr & Amort (30,259) (31,066) (30,259) (31,066) 
Consolidated EBIT 57,085  61,468  60,712  63,393  
Less: Interest expense (1,453) (5,264) (1,453) (5,264) 
Less: Income tax expense (12,501) (8,931) (13,335) (9,393) 
Net earnings from cont ops$43,131  47,273  45,924  48,736  
            

   

       ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
   
    June 30,
2021
 September 30,
2020
       
Assets    
 Cash and cash equivalents$78,359 52,560
 Accounts receivable, net 135,343 144,082
 Contract assets 94,768 94,302
 Inventories 141,113 135,296
 Other current assets 21,282 17,053
  Total current assets 470,865 443,293
 Property, plant and equipment, net 141,967 139,870
 Intangible assets, net 343,346 346,632
 Goodwill 411,732 408,063
 Operating lease assets 30,426 21,390
 Other assets 10,347 10,938
   $1,408,683 1,370,186
       
Liabilities and Shareholders' Equity    
 Current maturities of long-term debt & short-term borrowings$20,000 22,368
 Accounts payable 50,921 50,525
 Contract liabilities 105,822 100,551
 Other current liabilities 76,649 82,585
  Total current liabilities 253,392 256,029
 Deferred tax liabilities 56,992 60,170
 Non-current operating lease liabilities 26,458 16,785
 Other liabilities 38,987 38,176
 Long-term debt 28,000 40,000
 Shareholders' equity 1,004,854 959,026
   $1,408,683 1,370,186


ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
     
  Nine Months
Ended
June 30, 2021
 Nine Months
Ended
June 30, 2020
Cash flows from operating activities:    
Net earnings$43,131  123,286 
Earnings from discontinued operations -  (76,013)
Adjustments to reconcile net earnings to net cash    
provided by operating activities:    
Depreciation and amortization 30,259  31,066 
Stock compensation expense 5,386  4,184 
Changes in assets and liabilities 2,520  (20,926)
Gain on sale of building and land (1,950) - 
Effect of deferred taxes (3,946) 2,155 
Pension contributions related to terminated pension plan -  (10,000)
Net cash provided by operating activities - continuing operations 75,400  53,752 
Net cash used by operating activities - discontinued operations -  (14,737)
Net cash provided by operating activities 75,400  39,015 
     
Cash flows from investing activities:    
Acquisition of business, net of cash acquired (6,684) - 
Proceeds from sale of building and land 1,950  - 
Capital expenditures (17,887) (28,291)
Additions to capitalized software (6,500) (6,564)
Net cash used by investing activities - continuing operations (29,121) (34,855)
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 (used) provided by investing activities (29,121) 147,229 
     
Cash flows from financing activities:    
Proceeds from long-term debt and short-term borrowings 80,000  11,577 
Principal payments on long-term debt and short-term borrowings (94,368) (145,000)
Dividends paid (6,249) (6,240)
Other (1,674) (3,127)
Net cash used by financing activities - continuing operations (22,291) (142,790)
Net cash used by financing activities - discontinued operations -  (2,140)
Net cash used by financing activities (22,291) (144,930)
     
Effect of exchange rate changes on cash and cash equivalents 1,811  1,617 
     
Net increase in cash and cash equivalents 25,799  42,931 
Cash and cash equivalents, beginning of period 52,560  61,808 
Cash and cash equivalents, end of period$78,359  104,739 

   

   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data (Unaudited)
(Dollars in thousands)
   
Backlog And Entered Orders - Q3 2021 Aerospace & Defense USG Test Total
 Beginning Backlog - 4/1/21$349,165  48,943  118,424  516,532 
 Entered Orders 95,145  55,476  53,228  203,849 
 Sales  (85,576) (47,704) (48,114) (181,394)
 Ending Backlog - 6/30/21$358,734  56,715  123,538  538,987 
           
Backlog And Entered Orders - YTD Q3 2021 Aerospace & Defense USG Test Total
 Beginning Backlog - 10/1/20$344,661  50,688  115,854  511,203 
 Entered Orders 248,793  147,826  141,127  537,746 
 Sales  (234,720) (141,799) (133,443) (509,962)
 Ending Backlog - 6/30/21$358,734  56,715  123,538  538,987 

   

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures (Unaudited)
   
      
Adjusted Basis Reconciliation - Q3 2021 SG&A EPS
 GAAP Basis 42,882  $0.57 
      
 Adjustments     
 Management Transition & Acquisition Costs (3,023) $0.09 
 USG (Morgan Schaffer) Facility Move -  $0.01 
 Total Adjustments (3,023) $0.10 
      
 As Adjusted Basis 39,859  $0.67 
      
 The $0.10 of EPS adjustments per share consists of $3.5 million of pre-tax charges offset by $0.8 million of tax benefit for a net impact of $2.7 million.
      
Adjusted Basis Reconciliation – YTD Q3 2021 SG&A EPS
 GAAP Basis 122,628  $1.65 
      
 Adjustments     
 Management Transition & Acquisition Costs (3,373) $0.10 
 ATM Acquisition Inventory Step-up Charge   $0.01 
 USG (Manta & Morgan Schaffer) Facility Consol-  $0.05 
 Settlement from Doble Watertown Facility Sale-  ($0.06)
 Total Adjustments (3,373) $0.10 
      
 As Adjusted Basis 119,255  $1.75 
      
 The $0.10 of EPS adjustments per share consists of $3.6 million of pre-tax charges offset by $0.8 million of tax benefit for a net impact of $2.8 million.
      
Adjusted Basis Reconciliation – Q3 2020 SG&A EPS
 EPS from Continuing Ops – GAAP Basis 36,936  $0.72 
 Adjustments (defined below) (1,235) $0.04 
 EPS from Continuing Ops – As Adjusted Basis35,701  $0.76 
      
 Adjustments exclude $0.04 per share of after-tax charges primarily related to incremental costs associated with COVID-19 in the third quarter of 2020. The $0.04 of EPS adjustments per share consists of $1.2 million of pre-tax charges offset by $.3 million of tax benefit for a net impact of $0.9 million.
      
Adjusted Basis Reconciliation – YTD Q3 2020 SG&A EPS
 EPS from Continuing Ops – GAAP Basis 119,023  $1.81 
 Adjustments (defined below) (1,235) $0.06 
 EPS from Continuing Ops – As Adjusted Basis117,788  $1.87 
      
 Adjustments exclude $0.06 per share of after-tax charges primarily related to incremental costs associated with COVID-19 and charges related to the move of the Doble headquarters facility in the first nine months of 2020. The $0.06 of EPS adjustments per share consists of $1.9 million of pre-tax charges offset by $.4 million of tax benefit for a net impact of $1.5 million.

    
SOURCE ESCO Technologies Inc.
Kate Lowrey, Director of Investor Relations, (314) 213-7277


Source: ESCO Technologies Inc.