-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QrkZ5cNnSBIlJ/sR6i3P1D0fBpAykT4RQjcHMu5SSfoML77TfXluHTeqzxR6W2ww OHKYLyfruSMiEpiF2f73FA== 0000866706-04-000057.txt : 20040511 0000866706-04-000057.hdr.sgml : 20040511 20040510181808 ACCESSION NUMBER: 0000866706-04-000057 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040331 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESCO TECHNOLOGIES INC CENTRAL INDEX KEY: 0000866706 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 431554045 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10596 FILM NUMBER: 04794519 BUSINESS ADDRESS: STREET 1: 8888 LADUE RD STREET 2: SUITE 200 CITY: ST LOUIS STATE: MO ZIP: 63124-2090 BUSINESS PHONE: 3142137200 MAIL ADDRESS: STREET 1: 8888 LADUE RD STREET 2: SUITE 200 CITY: ST LOUIS STATE: M0 ZIP: 63124-2090 FORMER COMPANY: FORMER CONFORMED NAME: ESCO ELECTRONICS CORP DATE OF NAME CHANGE: 19920703 8-K 1 esco8k2ndqtr04b.htm ESCO TECHNOLOGIES 8K 2ND QUARTER 2004 ESCO Technologies 8K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 11, 2004

ESCO TECHNOLOGIES INC.

(Exact Name of Registrant as Specified in Charter)

           Missouri
        (State or Other
Jurisdiction of Incorporation) 		      1-10596
      (Commission
      File Number) 		       43-1554045
       (I.R.S. Employer
       Identification No.)

          8888 Ladue Road, Suite 200, St. Louis, Missouri
                   (Address of Principal Executive Offices) 		63124-2056            
(Zip Code)            

Registrant’s telephone number, including area code: 314-213-7200

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

(c) Exhibits

Exhibit No.       Description of Exhibit

    99.1                 Press Release dated May 11, 2004


ITEM 9. REGULATION FD DISCLOSURE

Today, May 11, 2004, the Registrant is issuing a press release announcing its fiscal 2004 second quarter and first six months financial and operating results. This press release is furnished herewith as Exhibit 99.1 and will be posted on the Registrant’s website located at http://www.escotechnologies.com. It can be viewed through the Investor Relations page of the website under the tab “Press Releases”, although the Registrant reserves the right to discontinue that availability at any time.

In addition, the Registrant announced in a press release issued on April 16, 2004 that a webcast of a fiscal second quarter conference call would be held on May 11, 2004 at 9:30 am, central time, and that the related press release would be available on that date.

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Operations and Financial Information Furnished

Today, the Registrant is issuing a press release (Exhibit 99.1 to this report) announcing its fiscal 2004 second quarter and first six months financial and operating results. See Item 9, Regulation FD Disclosure, above.

Non-GAAP Financial Measures

The press release furnished herewith contains financial measures and financial terms not calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”) in order to provide investors and management with an alternative method for assessing the Registrant’s operating results in a manner that is focused on the performance of the Registrant’s ongoing operations. The Registrant has provided definitions below for the non-GAAP financial measures utilized in the press release, together with an explanation of why management uses these measures, and why management believes that these non-GAAP financial measures are useful to investors. The press release uses the non-GAAP financial measures of “operational” sales, net earnings, earnings per share and results of operations and also of “EBIT from continuing operations,” “EBIT margin”, “free cash flow from continuing operations ” and Filtration segment “operational” net sales and EBIT.

The Registrant defines “operational” sales, net earnings, earnings per share, and results of operations as sales, net earnings, earnings per share, and results of operations in accordance with GAAP, except for the exclusion of (i) exit costs and severance charges related to the shutdown of the Filtration segment Puerto Rico facility, (ii) costs resulting from the Management Transition Agreement between the Registrant and its former Chairman and (iii) the charge resulting from an equipment lease termination related to the Whatman Hemasure MSA dispute. The Registrant defines “operational” EBIT margin as EBIT margin (defined below) with the foregoing exclusions. The Registrant’s management uses these “operational” results in evaluating the measures of continuing operations of the Registrant and believes that this information provides investors with additional insight into the period over period financial performance of the Registrant.

The Registrant defines “EBIT from continuing operations” as earnings before interest and taxes. The Registrant defines “EBIT margin” as EBIT from continuing operations as a percent of net sales. The Registrant’s management evaluates the performance of its operating segments based on EBIT from continuing operations and EBIT margin, and believes that EBIT from continuing operations and EBIT margin are useful to investors to demonstrate the operational profitability of the Registrant’s business segments by excluding interest and taxes, which are generally accounted for across the entire Registrant on a consolidated basis. EBIT from continuing operations is also one of the measures used by management in determining resource allocations within the Registrant and incentive compensation.

The Registrant defines “Free cash flow from continuing operations” as “Net cash provided by operating activities—continuing operations” less “Capital expenditures—continuing operations”. The Registrant’s management believes that free cash flow from continuing operations is useful to investors and management as a supplemental financial measurement in the evaluation of the Registrant’s business and believes that free cash flow may provide additional information with respect to the Registrant’s ability to meet its future debt service, capital expenditures and working capital requirements. Free cash flow can also be reinvested in the Registrant for future growth.

The Registrant defines Filtration segment “operational” net sales and EBIT as segment net sales and EBIT, excluding the costs related to the shutdown of the Puerto Rico facility.

The presentation of the information described above is intended to supplement investors’ understanding of the Registrant’s operating performance. The Registrant’s non-GAAP financial measures may not be comparable to other companies’ non-GAAP financial performance measures. Furthermore, these measures are not intended to replace net earnings, cash flows, financial position, or comprehensive income (loss), as determined in accordance with GAAP.

Other Matters

The information contained in this report, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 as amended (“Exchange Act”) or otherwise subject to the liabilities of that section, unless the Registrant specifically incorporates it by reference in a document filed under the Securities Act of 1933 as amended or the Exchange Act.

SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         ESCO TECHNOLOGIES INC.
Dated: May 11, 2004                By: /s/ G.E. Muenster
                   G.E. Muenster
                   Vice President and
                   Chief Financial Officer

EXHIBIT INDEX

Exhibit No. Description of Exhibit
99.1 Press release dated May 11, 2004
EX-99.1 2 pressreleaseasc.txt PRESS RELEASE Exhibit 99.1 News From ESCO Technologies For more information contact: For media inquiries: Patricia K. Moore David P. Garino Director, Investor Relations (314) 982-0551 ESCO Technologies Inc. (314) 213-7277 ESCO ANNOUNCES SECOND QUARTER RESULTS St. Louis, MO, May 11, 2004 - ESCO Technologies Inc. (NYSE: ESE) today announced its results for the fiscal 2004 second quarter ended March 31, 2004. These results reflect the following items which were announced in previous releases in fiscal 2003: severance and move charges related to the exit and relocation of Filtertek's Puerto Rican manufacturing facility; the divestiture of the Microfiltration and Separations businesses (MicroSep) which is accounted for as "discontinued operations;" and the fiscal 2003 costs associated with the Management Transition Agreement (MTA) and the Whatman Manufacturing and Supply Agreement (MSA). The reconciliation of GAAP reported earnings to "Operational" earnings is included in the Exhibits attached to this release. The Company believes that the presentation of "Operational" earnings provides additional insight into the Company's performance. The Company uses the following definitions in describing its results of operations for the periods noted: o "GAAP": Represents the results of operations required by accounting principles generally accepted in the United States of America. The GAAP reported results present the MicroSep businesses as "discontinued operations." o "Adjustments": Represents the Filtertek severance and exit costs incurred in first half of fiscal 2004, the MTA costs incurred during the first half of fiscal 2003, and the MSA charge recorded in the second quarter of fiscal 2003. o "Operational": Represents the financial results from continuing operations, excluding the MicroSep businesses and excluding the "Adjustments" as defined above. The "Adjustments" are considered ordinary operating expenses under GAAP. Results of Operations (in millions, except EPS) - --------------------------------------------------- Sales and net earnings for the fiscal 2004 and 2003 second quarter and six month year-to-date periods ended March 31 are noted below: 2nd Qtr. - FY 2004 Sales Net Earnings Diluted EPS ------------------- ----- ------------ ----------- GAAP $102.2M $5.4M $0.40 Operational $102.2M $8.1M $0.60 2nd Qtr. - FY 2003 Sales Net Earnings Diluted EPS ------------------ ----- ------------ ----------- GAAP $102.0M $5.6M $0.43 Operational $102.0M $8.5M $0.65 6 Months YTD. - FY 2004 Sales Net Earnings Diluted EPS ----------------------- ----- ------------ ----------- GAAP $198.6M $11.5M $0.87 Operational $198.6M $15.2M $1.14 6 Months YTD - FY 2003 Sales Net Earnings Diluted EPS ---------------------- ----- ------------ ----------- GAAP $200.3M $12.2M $0.93 Operational $200.3M $17.4M $1.33 Sales - ----- Fiscal 2004 second quarter consolidated sales of $102.2 million were consistent with fiscal 2003 second quarter sales. Year-to-date sales in fiscal 2004 decreased slightly versus the similar period in fiscal 2003. On a segment basis for the fiscal 2004 second quarter, Communications sales decreased 20 percent, Filtration sales increased 6 percent and Test sales increased 22 percent, as compared to the prior year second quarter. Year-to-date, fiscal 2004 Communications sales decreased 20 percent, Filtration sales increased 4 percent and Test sales increased 25 percent as compared to the first six months of fiscal 2003. Communications segment sales decreased in both the quarter and year-to- date periods as a result of lower shipments of Automatic Meter Reading (AMR) equipment to PPL Electric Utilities Corporation (PPL) and lower shipments of Comtrak's SecurVision(R) video security products. Sales to PPL were $15.2 million and $37.8 million in the fiscal 2003 second quarter and six months, respectively, compared to $7.4 million and $19.9 million in the current year second quarter and six months, respectively. The balance of the PPL contract is expected to be complete during fiscal 2004. The decrease in sales to PPL was partially offset by significantly higher AMR product sales to the electric utility cooperative (COOP) market and other customers. Sales to COOP and other customers increased 21 percent during the first six months of fiscal 2004 to $41.0 million, from $33.7 million in the comparable period of fiscal 2003. Filtration segment sales increased in the second quarter and year-to-date periods primarily as a result of higher defense aerospace shipments at VACCO and PTI, and as a result of favorable foreign currency exchange rates at Filtertek's European operations. The Test segment sales increased significantly in the current quarter and year-to-date periods as a result of additional test chamber installations in Europe and increased volume from the Company's Asian operations. Year-to-date sales increased $10.8 million of which $1.7 million related to the acoustics business being included for six months in the current year and only three months in the prior year. Earnings Before Interest and Taxes (EBIT) - ----------------------------------------- EBIT from continuing operations for the periods ended March 31, 2004 and 2003 were negatively affected by the impact of the Puerto Rican facility exit and move costs (fiscal 2004), and the MTA and MSA (fiscal 2003). The pretax charges in continuing operations in fiscal 2004 were $0.6 million for the second quarter and $1.3 million year-to-date related to Puerto Rico. In fiscal 2003, the charges in continuing operations include $2.2 million and $2.9 million for the MTA and MSA for the second quarter and year-to-date periods, respectively. These items are identified within "Earnings before income taxes" in the Exhibits attached to this release. On a segment basis, the following items impacted EBIT from continuing operations as a percent of sales ("EBIT margin") during fiscal 2004. In the Communications segment, EBIT margin is lower than prior year due to additional sales, marketing, and engineering costs incurred at DCSI to further penetrate the Investor Owned Utility (IOU) market. These additional costs were incurred against a lower sales base recorded in the period. In the Filtration segment, EBIT margin improved in the second quarter of fiscal 2004 primarily due to higher defense sales at VACCO. Year-to-date, EBIT margin was lower than prior year due to the impact of the exit and move costs incurred and the inefficiencies being absorbed at Filtertek as a result of operating in both the Puerto Rico and Juarez facilities. The move out of Puerto Rico was completed in mid-March 2004, and Management expects the facility to be sold within the next 12 months. Filtration EBIT was also negatively impacted by the lower sales of commercial aerospace products. In the Test segment, EBIT margin improved in the current fiscal year periods as a result of the significantly higher sales volume recognized in fiscal 2004. New Orders and Cash Flow - ------------------------ New orders received during fiscal 2004 were $96.8 million and $195.1 million for the second quarter and six-month period, resulting in a backlog at March 31, 2004 of $259.5 million. New orders received during the first six months of fiscal 2004 in Filtration, Communications and Test were $86.3 million, $57.5 million, and $51.3 million, respectively. During the second quarter, the Communications segment recorded $30.5 million of new orders related to AMR products, primarily for the COOP market. During the first six months of fiscal 2004, the Company generated $19.5 million of free cash flow from continuing operations. Discontinued operations used $3.6 million of free cash flow. Free cash flow from continuing operations is defined as "Net Cash Provided by Operating Activities - Continuing Operations" less "Capital Expenditures - Continuing Operations." For a reconciliation of free cash flow, see the Exhibits attached to this release. Subsequent Events - ----------------- On April 2, 2004, the Company sold two of its three MicroSep businesses for $18 million in cash. PTI Advanced Filtration Inc. (Oxnard, CA) and PTI Technologies Limited (Sheffield, England) were sold to domnick hunter group plc (London: DKH). Management expects to complete the sale of the remaining MicroSep business, PTI S.p.A. (Milan, Italy) before the end of fiscal 2004. Chairman's Commentary - --------------------- Vic Richey, Chairman and Chief Executive Officer, commented, "While our orders and revenues for the second quarter were generally in line with our expectations, our second quarter earnings were stronger than we anticipated at the start of the quarter. Our earnings improvement was, for the most part, a result of stronger margins in our Filtration and Test segments. "The increase to our full year earnings outlook which is covered in more detail in the Fiscal 2004 Business Outlook section of this release reflects our second quarter improvements and our continued expectation for a strong second half. "Addressing the second quarter results, in Filtration, our margin improvement was primarily a product of contributions from our aerospace and defense programs. Additionally, in March, we completed the closure of our plant in Puerto Rico. The improvements in our cost position resulting from the closure is significant in the context of our expectations for further performance improvements in the Filtration segment. "In the Test segment, revenues and margins improved significantly in the second quarter both on a year-over-year basis and sequentially. Our performance reflects both an improved operating environment and our ability to capitalize on this improvement by virtue of our prominence in these end markets. "In Communications, throughout the second quarter we continued to demonstrate our strength in the COOP market and in April we expanded our presence in the IOU space with the booking of a $7.5M order from Bangor Hydro-Electric Company, an electric utility wholly-owned by Emera, Inc. (EMA-TSX). Excluding PPL, our second quarter orders were 135 percent of our sales in Communications. "We also completed the sale of two of the three MicroSep businesses that were held for sale. We still expect to complete this initiative prior to the end of the fiscal year." "Mr. Richey concluded, "In the second quarter we continued to make progress both in our financial performance and with the key initiatives we have undertaken to further advance the business." Fiscal 2004 Business Outlook - ---------------------------- Statements contained in the preceding and following paragraphs are based on current expectations. Statements that are not strictly historical are forward-looking, and actual results may differ materially. The fiscal 2004 Business Outlook described below does not include the impact of potential acquisitions. The fiscal 2004 Revenue and EBIT guidance provided by Management in the Company's November 20, 2003 press release remains unchanged for the Filtration and Communications segments. Management now expects year-over-year revenue growth in the Test segment in the range of 20 percent to 25 percent, versus the previous revenue growth expectation of 15 percent to 20 percent. EBIT margins in the Test segment should remain in the 9 percent to 11 percent range. Earnings Per Share (GAAP and Operational) - ----------------------------------------- Management estimates fiscal 2004 GAAP earnings per share (EPS) from continuing operations to be in the range of $2.42 to $2.52 per share. The impact of the pretax charges related to the exit of the Puerto Rico facility was recognized in the first half of fiscal 2004. GAAP EPS from continuing operations for the second half of fiscal 2004 is expected to be in the range of $1.36 to $1.46 per share. Management estimates EPS on an Operational basis will be in the range of $2.50 to $2.60 per share for fiscal year 2004, excluding any contributions from new acquisitions or new IOU contracts. Operational EPS for the second half of fiscal 2004 is expected to be in the range of $1.36 to $1.46 per share. Conference Call - --------------- The Company will host a conference call today, May 11, 2004, at 9:30 a.m., Central Daylight Time (CDT), to discuss the Company's second quarter operating results. A live audio web cast will be available on the Company's web site at www.escotechnologies.com. Please access the web site at least fifteen minutes prior to the call to register, download and install any necessary audio software. A replay of the conference call will be available today from 12:00 p.m., CDT, until 11:59 p.m., CDT on May 18, 2004. To access the replay, dial 1-888-203-1112 and enter the pass code 658840. In addition, a replay will be available for seven days on the Company's web site noted above. Forward-Looking Statements - -------------------------- Statements in this press release regarding the results and timing of planned divestitures, the results of recent facility closures, real estate sales, the associated costs and resulting savings to be achieved, future fiscal 2004 revenues, EBIT, EPS, and earnings, the level of IOU activity, and other written or oral statements which are not strictly historical are "forward-looking" statements within the meaning of the safe harbor provisions of the federal securities laws. Investors are cautioned that such statements are only predictions, and speak only as of the date of this release. 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 timing and terms of the PTI S.p.A. divestiture; weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; competition; intellectual property rights; the performance of discontinued operations prior to completion of the PTI S.p.A. divestiture; successful execution of planned facility sales with regard to the Company's Puerto Rico facility; delivery delays or defaults by customers; termination for convenience of customer contracts; timing and magnitude of future contract awards; performance issues with key suppliers and subcontractors; collective bargaining and labor disputes; changes in laws and regulations including changes in accounting standards and taxation requirements; changes in foreign or U.S. business conditions affecting the distribution of foreign earnings; costs relating to environmental matters; litigation uncertainty; and the Company's successful execution of internal operating plans. ESCO, headquartered in St. Louis, is a leading supplier of engineered filtration products to the process, health care and transportation markets worldwide. In addition, the Company markets proprietary, special purpose communications systems and is the industry leader in RF shielding and EMC test products. (Tables Attached) Add XXX ESCO Technologies Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended March 31, 2004 (1) GAAP Adj. "Operational" -------- ------- ------------ Net Sales $102,171 102,171 Cost and Expenses: Cost of sales 70,781 70,781 SG&A 19,111 (176) (2) 18,935 Interest income (483) (483) Other expenses, net 513 (468) (3) 45 -------- ------- ------- Total costs and expenses 89,922 (644) 89,278 -------- ------- ------- Earnings before income taxes 12,249 644 12,893 Income taxes 4,684 155 (4) 4,839 -------- ------ ------- Net earnings from continuing operations 7,565 489 8,054 Loss from discontinued operations, net of tax (2,200) 2,200 (5) - Loss on sale of discontinued operations, net of tax - - - -------- ------ ------- Net loss from discontinued operations (2,200) 2,200 - ----- ----- ------- Net earnings $ 5,365 2,689 8,054 ======== ====== ======= Earnings (loss) per share: Basic Net earnings from continuing operations $ 0.59 0.63 Net loss from discontinued operations (0.17) 0.00 ------- ------- Net earnings $ 0.42 0.63 ======== ======= Diluted Net earnings from continuing operations $ 0.57 0.60 Net loss from discontinued operations (0.17) 0.00 --------- ------- Net earnings $ 0.40 0.60 ======== ======= Average common shares O/S: Basic 12,874 12,874 ======== ======= Diluted 13,325 13,325 ======== ======= (1) Represents results on an adjusted basis, after removing the items described below in (2)-(4). (2) Represents severance charges related to the exit of the Puerto Rico facility. (3) Represents shutdown costs related to the exit of the Puerto Rico facility. (4) Represents the tax impact of items described above in (2)-(3). (5) Relates to the MicroSep businesses, which are classified as "discontinued operations." - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended March 31, 2003 (1) GAAP Adj "Operational" ---- --- ------------- Net Sales $101,996 101,996 Cost and Expenses: Cost of sales 69,640 69,640 SG&A 18,327 (705)(2) 17,622 Interest income (158) (158) Other expenses, net 2,300 (1,489)(3) 811 -------- ------- ------- Total costs and expenses 90,109 (2,194) 87,915 -------- ------- ------- Earnings before income taxes 11,887 2,194 14,081 Income taxes 4,549 1,070 (4) 5,619 -------- ------- ------- Net earnings from continuing operations 7,338 1,124 8,462 Loss from discontinued operations, net of tax (1,707) 1,707 (5) - Gain (loss) on sale of discontinued operations, net of tax - - - ----- ----- ------ Net loss from discontinued operations (1,707) 1,707 - ----- ----- ------- Net earnings $ 5,631 2,831 8,462 -------- ------- ------- Earnings (loss) per share: Basic Net earnings from continuing operations $ 0.58 0.67 Net loss from discontinued operations (0.13) 0.00 -------- ------- Net earnings $ 0.45 0.67 ======== ======= Diluted Net earnings from continuing operations $ 0.56 0.65 Net loss from discontinued operations (0.13) 0.00 ======== ======= Net earnings $ 0.43 0.65 ======== ======= Average common shares O/S: Basic 12,627 12,627 ======== ======= Diluted 13,072 13,072 ======== ======= (1) Represents results on an adjusted basis, after removing the items described below in (2)-(4). (2) Represents the costs and tax impact related to the MTA between the Company and its former Chairman. (3) Represents the charge resulting from an equipment lease termination related to the Whatman Hemasure MSA dispute. (4) Represents the tax impact of the items described above in (2) - (3) (5) Relates to the MicroSep businesses which are classified as "discontinued operations." - more - Add XXX ESCO Technologies Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share amounts) Six Months Ended March 31, 2004 ------------------------------- (1) GAAP Adj. "Operational" -------- ------- ------------ Net Sales $198,567 198,567 Cost and Expenses: Cost of sales 137,051 137,051 SG&A 37,880 (470) (2) 37,410 Interest income (519) (519) Other expenses, net 1,127 (860) (3) 267 -------- ------ ------- Total costs and expenses 175,539 (1,330) 174,209 -------- ------ ------- Earnings before income taxes 23,028 1,330 24,358 Income taxes 8,875 305 (4) 9,180 -------- ------ ------- Net earnings from continuing operations 14,153 1,025 15,178 Loss from discontinued operations, net of tax (2,637) 2,637 (5) - Loss on sale of discontinued operations, net of tax - - - -------- ------ ------- Net loss from discontinued operations (2,637) 2,637 - ------ ----- ------- Net earnings $ 11,516 3,662 15,178 ======== ====== ======= Earnings (loss) per share: Basic Net earnings from continuing operations $ 1.10 1.18 Net loss from discontinued operations (0.20) 0.00 -------- ------- Net earnings $ 0.90 1.18 ======== ======= Diluted Net earnings from continuing operations $ 1.06 1.14 Net loss from discontinued operations (0.19) 0.00 -------- ------- Net earnings $ 0.87 1.14 ======== ======= Average common shares O/S: Basic 12,857 12,857 ======== ======= Diluted 13,305 13,305 ======== ======= (1) Represents results on an adjusted basis, after removing the items described below in (2)-(4). (2) Represents severance charges related to the exit of the Puerto Rico facility. (3) Represents shutdown costs related to the exit of the Puerto Rico facility. (4) Represents the tax impact of the items described above in (2) - (3). (5) Relates to the MicroSep businesses which are classified as "discontinued operations." - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per share amounts) Six Months Ended March 31, 2003 --------------------------------- (1) GAAP Adj. "Operational" ---- ---- ------------- Net Sales $ 200,285 200,285 Cost and Expenses: Cost of sales 136,197 136,197 SG&A 36,391 (1,411)(2) 34,980 Interest income (269) (269) Other expenses, net 2,816 (1,489)(3) 1,327 -------- ------- ----- Total costs and expenses 175,135 (2,900) 172,235 -------- ------- ------- Earnings before income taxes 25,150 2,900 28,050 Income taxes 9,338 1,338(4) 10,676 ------ ------ -------- Net earnings from continuing operations 15,812 1,562 17,374 Loss from discontinued operations, net of tax (3,629) 3,629(5) - ----- ----- ------ Gain (loss) on sale of discontinued operations, net of tax - - - ------- ------ ------- Net loss from discontinued operations (3,629) 3,629 - ------ ----- ------- Net earnings $ 12,183 5,191 17,374 -------- ------- ------- Earnings (loss) per share: Basic Net earnings from continuing operations $ 1.26 1.38 Net loss from discontinued operations (0.29) 0.00 -------- ------- Net earnings $ 0.97 1.38 -------- ------- Diluted Net earnings from continuing operations $ 1.21 1.33 Net loss from discontinued operations (0.28) 0.00 ------- ------- Net earnings 0.93 1.33 ======== ======= Average common shares O/S: Basic 12,590 12,590 ======== ======= Diluted 13,056 13,056 ======== ======= (1) Represents results on an adjusted basis, after removing the items described below in (2)-(4). (2) Represents the costs and tax impact related to the MTA between the Company and its former Chairman. (3) Represents the charge resulting from an equipment lease termination related to the Whatman Hemasure MSA Dispute. (4) Represents the tax impact of items (2) and (3) described above. (5) Relates to the MicroSep businesses which are classified as "discontinued operations." - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Condensed Business Segment Information (Unaudited) (Dollars in millions) Three Months Ended Six Months Ended March 31, March 31, --------- --------- 2004 2003 2004 2003 ---- ---- ---- ---- Net Sales-GAAP Filtration $ 42.2 39.9 82.1 79.0 Communications 30.4 37.8 61.8 77.4 Test 29.6 24.3 54.7 43.9 ------ ----- ----- ----- Totals $102.2 102.0 198.6 200.3 ====== ===== ===== ===== EBIT-GAAP basis (1) Filtration $ 4.2 (2) 3.4 (3) 7.7 (2) 9.1 (3) Communications 7.2 9.8 14.6 20.1 Test 3.3 2.4 5.5 3.7 Corporate (2.9) (3.9) (4) (5.3) (8.0) (5) ------ ------ ----- ----- Totals $ 11.8 11.7 22.5 24.9 ====== ====== ===== ===== Note: Amounts presented above exclude the operations of the MicroSep businesses, which are classified as "discontinued operations." Depreciation and amortization expense for continuing operations was $3.1 million and $3.3 million for the fiscal quarters ended March 31, 2004 and 2003, respectively and $5.9 million and $5.8 million for the six-months periods ended March 31, 2004 and 2003, respectively. (1) EBIT is defined as earnings from continuing operations before interest and taxes. (2) The reconciliation to Operational Revenue/EBIT for the Filtration segment is below: Q2 YTD Q2 FY 04 FY 04 YTD 04 FY 04 Net Sales EBIT Net Sales EBIT --------- ---- --------- ---- Filtration Segment - GAAP $42.2 $4.2 $82.1 $7.7 Add: Puerto Rico facility exit costs -- 0.6 -- 1.3 ----- ---- ----- ---- Filtration Segment - "Operational" $42.2 $4.8 $82.1 $9.0 ===== ==== ===== ==== (3) Includes a $1.5 million charge resulting from an equipment lease termination related to the Whatman Hemasure MSA dispute. (4) Includes $0.7 million of costs related to the MTA between the Company and its former Chairman. (5) Includes $1.4 million of costs related to the MTA between the Company and its former Chairman. - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Reconciliation of Non-GAAP Financial Measures (unaudited) (Dollars in millions) EBIT (1) - As Reported - ---------------------- Three Months Ended Six Months Ended March 31, March 31, -------------------- ------------- 2004 2003 2004 2003 ----- ----- ----- ----- EBIT $11.8 $11.7 $22.5 $24.9 Interest income 0.5 0.1 0.5 0.3 Less: Income taxes 4.7 4.5 8.8 9.4 ----- ----- ----- ----- Net earnings from continuing operations $ 7.6 $ 7.3 $14.2 $15.8 ===== ===== ===== ===== (1) EBIT is defined as earnings from continuing operations before interest and taxes. Excludes the operations of the MicroSep businesses, which are classified as "discontinued operations." EPS FY 2004 Reconciliation - -------------------------- Range ------------------------------------------- 1st Half Actual 2nd Half FY 2004 ------- ----------- ---------- GAAP outlook - Continuing Operations $1.06 $1.36-1.46 $2.42-2.52 Add: Puerto Rico exit $0.08 - $ 0.08 ----- ---------- ---------- Operational outlook (2) $1.14 $1.36-1.46 $2.50-2.60 ===== ========== ========== (2) Operational EPS is defined as earnings per share less the "adjustments" defined above. - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands) March 31, September 30, 2004 2003 ------------- ------------- Assets - ------ Cash and cash equivalents $ 40,672 $ 31,285 Accounts receivable, net 66,314 69,379 Costs and estimated earnings on long-term contracts 4,456 4,663 Inventories 51,080 48,432 Current portion of deferred tax assets 23,446 24,187 Other current assets 4,817 6,549 Current assets from discontinued operations (1) 23,405 21,640 -------- -------- Total current assets 214,190 206,135 Property, plant and equipment, net 71,413 71,169 Goodwill 68,886 68,653 Deferred tax assets 16,432 16,618 Other assets 15,958 14,081 Other assets from discontinued operations (1) 13,904 16,725 -------- -------- $400,783 $393,381 ======== ======== Liabilities and Shareholders' Equity - ------------------------------------ Short-term borrowings and current maturities of long-term debt $ 440 $ 10,143 Other current liabilities 65,309 66,097 Current liabilities from discontinued operations (1) 10,633 9,397 -------- -------- Total current liabilities 76,382 85,637 Deferred income 2,966 3,194 Other liabilities 20,439 20,556 Long-term debt 513 490 Liabilities from discontinued operations (1) 9,395 8,115 Shareholders' equity 291,088 275,389 -------- -------- $400,783 $393,381 ======== ======== (1) Relates to the MicroSep businesses which are classified as "discontinued operations." - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Six Months Six Months Ended Ended March 31, 2004 March 31, 2003 -------------- -------------- Cash flows from operating activities: Net earnings $ 11,516 $12,183 Adjustments to reconcile net earnings to net cash provided by operating activities: Loss from discontinued operations, net of tax 2,637 3,629 Depreciation and amortization 5,904 5,796 Changes in operating working capital 2,309 (8,455) Effect of deferred taxes 186 2,912 Other 1,768 3,025 -------- ------- Net cash provided by operating activities-continuing operations 24,320 19,090 Net cash used by discontinued operations (1) (2,246) (3,315) -------- ------- Net cash provided by operating activities 22,074 15,775 -------- ------- Cash flows from investing activities: Acquisition of businesses-continuing operations - (4,000) Acquisition of businesses-discontinued operations - (1,364) Proceeds from note receivable 2,120 - Capital expenditures-continuing operations (4,803) (4,121) Capital expenditures-discontinued operations (1,379) (1,897) -------- ------- Net cash used by investing activities (4,062) (11,382) -------- ------- Cash flows from financing activities: Proceeds from long-term debt 378 0 Net decrease in short-term borrowings (9,635) (54) Principal payments on long-term debt- continuing operations (76) (626) Other 708 1,014 -------- -------- Net cash used provided by financing activities (8,625) 334 -------- -------- Net increase in cash and cash equivalents 9,387 4,727 Cash and cash equivalents, beginning of period 31,285 24,930 -------- -------- Cash and cash equivalents, end of period $ 40,672 29,657 ======== ======== (1) Relates to the MicroSep businesses which are classified as "discontinued operations." - more - Add XXX ESCO Technologies Inc. and Subsidiaries Free Cash Flow - YTD FY 2004 - March 31, 2004 (Unaudited) (Dollars in thousands) Continuing Discontinued Operations Operations Total ---------- ---------- ----- Net cash provided by operating activities $ 24,320 (2,246) 22,074 Less: Capital Expenditures (4,803) (1,379) (6,182) --------- ------ ------ Free cash flow $ 19,517 (3,625) 15,892 ========= ====== ====== - more - Add XXX ESCO TECHNOLOGIES INC. AND SUBSIDIARIES Other Selected Financial Data (Unaudited) (Dollars in thousands) Backlog And Entered - ------------------- Orders-Q2 FY 2004 (1) Filtration Comm. Test Total - --------------------- ---------- ----- ---- ----- Beginning Backlog- 12/31/03 $ 93,016 125,563 46,311 264,890 Entered Orders 39,588 30,920 * 26,267 96,775 Sales (42,219) (30,359)* (29,593) (102,171) --------- ------- ------- -------- Ending Backlog- 3/31/04 $ 90,385 126,124 42,985 259,494 ========= ======= ======= ======== Backlog And Entered - ------------------- Orders-YTD FY 2004 (1) Filtration Comm. Test Total - ---------------------- ---------- ----- ---- ----- Beginning Backlog- 9/30/03 $ 86,194 130,434 46,342 262,970 Entered Orders 86,318 57,463 * 51,310 195,091 Sales (82,127) (61,773)* (54,667) (198,567) --------- ------- ------- -------- Ending Backlog- 3/31/04 $ 90,385 126,124 42,985 259,494 ========= ======= ======= ======== (1) Excludes the MicroSep businesses for the period presented. Q2 YTD FY 2004 Q2 FY 2004 YTD Entered FY 2004 Entered FY 2004 *Communications Recap: Orders Sales Orders Sales - ---------------------- -------- ------- ------- ------- AMR Products (DCSI) $30,488 29,927 56,578 60,888 SecurVision Video Security (Comtrak) 432 432 885 885 ------- ------- ------ ------ Total 30,920 30,359 57,463 61,773 Orders/Sales to PPL - (7,430) - (19,913) ------- ------ ------ ------- Excluding PPL $30,920 22,929 57,463 41,860 ======= ======= ====== ====== # # # -----END PRIVACY-ENHANCED MESSAGE-----