Missouri
|
1-10596
|
43-1554045
|
(State or Other
|
(Commission
|
(I.R.S. Employer
|
Jurisdiction of Incorporation)
|
File Number)
|
Identification No.)
|
9900A Clayton Road, St. Louis, Missouri
|
63124-1186
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
[ ]
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
[ ]
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
[ ]
|
Pre-commencement communications pursuant to Rule 14d-2 (b) under the Exchange Act (17 CFR 240.14d-2 (b))
|
[ ]
|
Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange Act (17 CFR 240.113d-4 (c))
|
|
(a)
|
Section 3.1(a) was amended to eliminate reference to a provision of the Missouri corporation laws no longer in effect which formerly required the Registrant to report any change in the number of directors to the Secretary of State; and
|
|
(b)
|
Section 3.8 was amended to add a provision that a person first elected to the Board of Directors effective on or after May 5, 2014 shall not be eligible for election as a director if such person's 75th birthday shall fall on a date prior to the commencement of the term for which such person is to be elected or appointed. This provision is applicable to the two directors named in Item 5.02 of this Report.
|
|
G.E. Muenster
|
|
Executive Vice President
|
|
and Chief Financial Officer
|
·
|
Q2 2014 sales increased $7 million, or 6 percent to $125 million compared to $118 million in Q2 2013. During 2014, Q2 Filtration sales increased $5 million (9 percent), Test sales increased $1 million (3 percent), and Utility Solutions Group (USG, or Doble) sales increased $1 million (3 percent) compared to prior year Q2;
|
·
|
Q2 2014 gross margin was approximately 38 percent in both periods presented due to the similar sales mix in the respective quarters;
|
·
|
Q2 2014 SG&A increased $0.2 million compared to Q2 2013. This is the result of the addition of Canyon Engineering and higher engineering costs incurred at PTI related to the recently announced new aerospace platform wins, partially offset by lower costs at Doble and Corporate;
|
·
|
The effective tax rate in Q2 2014 was 30 percent compared to 31 percent (as adjusted) in Q2 2013. The Q2 2013 GAAP effective tax rate included a $1.8 million write-off of the Doble-Lemke deferred tax asset resulting from the prior year closure of the German facility. For comparability, the $1.8 million tax charge is excluded from EPS from Continuing Operations – As Adjusted in Q2 2013;
|
·
|
GAAP EPS from Continuing Operations was $0.35 per share in Q2 2014, compared to $0.21 per share in Q2 2013;
|
·
|
During Q2 2014, net cash provided by operating activities was $11 million;
|
·
|
At March 31, 2014, the Company had $36 million of cash and $40 million of debt outstanding for a net debt position of $4 million;
|
·
|
Orders received in Q2 2014 were $136 million resulting in a book-to-bill ratio of 1.1x, and an order backlog of $273 million at March 31, 2014.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
Condensed Consolidated Statements of Operations (Unaudited)
|
||||||||
(Dollars in thousands, except per share amounts)
|
||||||||
|
||||||||
Three Months
Ended
March 31, 2014
|
Three Months
Ended
March 31, 2013
|
|||||||
Net Sales
|
124,762
|
118,039
|
||||||
Cost and Expenses:
|
||||||||
Cost of sales
|
77,436
|
72,888
|
||||||
Selling, general and administrative expenses
|
31,818
|
31,577
|
||||||
Amortization of intangible assets
|
1,679
|
1,500
|
||||||
Interest expense
|
654
|
636
|
||||||
Other (income) expenses, net
|
(39)
|
901
|
||||||
Total costs and expenses
|
111,548
|
107,502
|
||||||
Earnings before income taxes
|
13,214
|
10,537
|
||||||
Income taxes
|
3,950
|
5,014
|
||||||
Net earnings from continuing operations
|
9,264
|
5,523
|
||||||
Earnings (loss) from discontinued operations,
|
||||||||
net of tax expense (benefit) of $4,407
|
||||||||
and $(3,028), respectively
|
7,501
|
(3,964)
|
||||||
Loss on sale of discontinued operations, net of
|
||||||||
tax benefit of $9,499
|
(50,442)
|
0
|
||||||
Net loss from discontinued operations
|
(42,941)
|
(3,964)
|
||||||
Net (loss) earnings
|
$
|
(33,677)
|
1,559
|
|||||
Earnings (loss) per share:
|
||||||||
Diluted - GAAP
|
||||||||
Continuing operations
|
0.35
|
0.21
|
||||||
Discontinued operations
|
(1.61)
|
(0.15)
|
||||||
Net (loss) earnings
|
$
|
(1.26)
|
0.06
|
|||||
Diluted - As Adjusted Basis
|
||||||||
Continuing operations
|
$
|
0.36
|
(1)
|
0.31
|
(2)
|
|||
Average common shares O/S:
|
||||||||
Diluted
|
26,713
|
26,745
|
||||||
(1)
|
Adjusted basis includes $0.2 million (or $0.01 per share) of add back adjustments for
|
|||||||
restructuring charges incurred at Crissair during the second quarter of fiscal 2014.
|
||||||||
(2)
|
Adjusted basis includes $2.7 million (or $0.10 per share) of add back adjustments for
|
|||||||
restructuring charges incurred at ETS and Doble Lemke during the second quarter of
|
||||||||
fiscal 2013. The $2.7 million of adjustments includes $1.8 million of tax charges.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
Condensed Consolidated Statements of Operations (Unaudited)
|
||||||||
(Dollars in thousands, except per share amounts)
|
||||||||
|
||||||||
Six Months
Ended
March 31, 2014
|
Six Months
Ended
March 31, 2013
|
|||||||
Net Sales
|
249,212
|
228,557
|
||||||
Cost and Expenses:
|
||||||||
Cost of sales
|
151,717
|
139,645
|
||||||
Selling, general and administrative expenses
|
65,690
|
65,254
|
||||||
Amortization of intangible assets
|
3,365
|
3,035
|
||||||
Interest expense
|
1,346
|
1,219
|
||||||
Other (income) expenses, net
|
140
|
847
|
||||||
Total costs and expenses
|
222,258
|
210,000
|
||||||
Earnings before income taxes
|
26,954
|
18,557
|
||||||
Income taxes
|
8,858
|
7,691
|
||||||
Net earnings from continuing operations
|
18,096
|
10,866
|
||||||
Earnings (loss) from discontinued operations,
|
||||||||
net of tax expense (benefit) of $5,713
|
||||||||
and $(5,654), respectively
|
9,858
|
(9,061)
|
||||||
Loss on sale of discontinued operations,
|
||||||||
net of tax benefit of $9,499
|
(50,442)
|
0
|
||||||
Net loss from discontinued operations
|
(40,584)
|
(9,061)
|
||||||
Net (loss) earnings
|
$
|
(22,488)
|
1,805
|
|||||
Earnings (loss) per share:
|
||||||||
Diluted - GAAP
|
||||||||
Continuing operations
|
0.68
|
0.41
|
||||||
Discontinued operations
|
(1.52)
|
(0.34)
|
||||||
Net (loss) earnings
|
$
|
(0.84)
|
0.07
|
|||||
Diluted - As Adjusted Basis
|
||||||||
Continuing operations
|
$
|
0.70
|
(1)
|
0.55
|
(2)
|
|||
Average common shares O/S:
|
||||||||
Diluted
|
26,749
|
26,763
|
||||||
(1)
|
Adjusted basis includes $0.3 million (or $0.02 per share) of add back adjustments for
|
|||||||
restructuring charges incurred at Crissair during the first six months of fiscal 2014.
|
||||||||
(2)
|
Adjusted basis includes $3.6 million (or $0.14 per share) of add back adjustments for
|
|||||||
restructuring charges incurred at ETS and Doble Lemke during the first six months of fiscal 2013.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||
Condensed Business Segment Information (Unaudited)
|
||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Three Months
Ended
March 31,
GAAP
|
Adjustments
|
Three Months
Ended
March 31,
As Adjusted
|
||||||||||||||||||||||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||||||||||||||||
Net Sales
|
||||||||||||||||||||||||||||||||
Filtration
|
$ | 58,397 | 53,626 | 58,397 | 53,626 | |||||||||||||||||||||||||||
Test
|
41,025 | 39,821 | 41,025 | 39,821 | ||||||||||||||||||||||||||||
Utility Solutions Group
|
25,340 | 24,592 | 25,340 | 24,592 | ||||||||||||||||||||||||||||
Totals
|
$ | 124,762 | 118,039 | 0 | 0 | 124,762 | 118,039 | |||||||||||||||||||||||||
EBIT
|
||||||||||||||||||||||||||||||||
Filtration
|
$ | 10,100 | 10,894 | 306 | (1) | 10,406 | 10,894 | |||||||||||||||||||||||||
Test
|
3,533 | 2,559 | 1,423 | (2) | 3,533 | 3,982 | ||||||||||||||||||||||||||
Utility Solutions Group
|
5,518 | 4,149 | 5,518 | 4,149 | ||||||||||||||||||||||||||||
Corporate
|
(5,283 | ) | (6,429 | ) | (5,283 | ) | (6,429 | ) | ||||||||||||||||||||||||
Consolidated EBIT
|
13,868 | 11,173 | 306 | 1,423 | 14,174 | 12,596 | ||||||||||||||||||||||||||
Less: Interest expense
|
(654 | ) | (636 | ) | (654 | ) | (636 | ) | ||||||||||||||||||||||||
Earnings before income
|
||||||||||||||||||||||||||||||||
taxes from Cont Ops
|
$ | 13,214 | 10,537 | 306 | 1,423 | 13,520 | 11,960 | |||||||||||||||||||||||||
Note: The above table is presented on a continuing operations basis.
|
||||||||||||||||||||||||||||||||
Note: Depreciation and amortization expense was $4.1 million and $4.0 million for the quarters
ended March 31, 2014 and 2103, respectively.
|
||||||||||||||||||||||||||||||||
(1) Includes $0.3 million (or $0.01) of restructuring charges at Crissair during the second quarter 2014.
|
||||||||||||||||||||||||||||||||
(2) Includes $1.4 million (or $0.04) of restructuring charges for ETS during the second quarter 2013.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||
Condensed Business Segment Information (Unaudited)
|
||||||||||||||||||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Six Months
Ended
March 31,
GAAP
|
Adjustments
|
Six Months
Ended
March 31,
As Adjusted
|
||||||||||||||||||||||||||||||
2014
|
2013
|
2014
|
2013
|
2014
|
2013
|
|||||||||||||||||||||||||||
Net Sales
|
||||||||||||||||||||||||||||||||
Filtration
|
$ | 113,875 | 99,977 | 113,875 | 99,977 | |||||||||||||||||||||||||||
Test
|
80,503 | 76,116 | 80,503 | 76,116 | ||||||||||||||||||||||||||||
Utility Solutions Group
|
54,834 | 52,464 | 54,834 | 52,464 | ||||||||||||||||||||||||||||
Totals
|
$ | 249,212 | 228,557 | 0 | 0 | 249,212 | 228,557 | |||||||||||||||||||||||||
EBIT
|
||||||||||||||||||||||||||||||||
Filtration
|
$ | 19,584 | 19,695 | 507 | (1) | 20,091 | 19,695 | |||||||||||||||||||||||||
Test
|
7,108 | 3,078 | 2,864 | (2) | 7,108 | 5,942 | ||||||||||||||||||||||||||
Utility Solutions Group
|
13,165 | 9,603 | 13,165 | 9,603 | ||||||||||||||||||||||||||||
Corporate
|
(11,557 | ) | (12,600 | ) | (11,557 | ) | (12,600 | ) | ||||||||||||||||||||||||
Consolidated EBIT
|
28,300 | 19,776 | 507 | 2,864 | 28,807 | 22,640 | ||||||||||||||||||||||||||
Less: Interest expense
|
(1,346 | ) | (1,219 | ) | (1,346 | ) | (1,219 | ) | ||||||||||||||||||||||||
Earnings before income
|
||||||||||||||||||||||||||||||||
taxes from Cont Ops
|
$ | 26,954 | 18,557 | 507 | 2,864 | 27,461 | 21,421 | |||||||||||||||||||||||||
Note: The above table is presented on a continuing operations basis.
|
||||||||||||||||||||||||||||||||
Note: Depreciation and amortization expense was $8.1 million and $7.6 million for the six-month
period ended March 31, 2014 and 2013, respectively.
|
||||||||||||||||||||||||||||||||
(1) Includes $0.5 million (or $0.02) of restructuring charges at Crissair during the first six months of 2014.
|
||||||||||||||||||||||||||||||||
(2) Includes $2.9 million (or $0.07) of restructuring charges for ETS during the first six months of 2013.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
Condensed Consolidated Balance Sheets (Unaudited)
|
||||||||
(Dollars in thousands)
|
||||||||
|
||||||||
March 31,
2014
|
September 30,
2013
|
|||||||
Assets
|
||||||||
Cash and cash equivalents
|
$ | 36,362 | 42,850 | |||||
Accounts receivable, net
|
91,668 | 91,980 | ||||||
Costs and estimated earnings on
|
||||||||
long-term contracts
|
16,765 | 20,717 | ||||||
Inventories
|
92,481 | 90,228 | ||||||
Current portion of deferred tax assets
|
16,447 | 23,349 | ||||||
Other current assets
|
23,270 | 15,930 | ||||||
Assets held for sale - current
|
0 | 108,867 | ||||||
Total current assets
|
276,993 | 393,921 | ||||||
Property, plant and equipment, net
|
74,656 | 75,536 | ||||||
Intangible assets, net
|
181,096 | 180,217 | ||||||
Goodwill
|
283,420 | 282,949 | ||||||
Other assets
|
9,211 | 9,469 | ||||||
Assets held for sale - other
|
0 | 150,236 | ||||||
$ | 825,376 | 1,092,328 | ||||||
Liabilities and Shareholders' Equity
|
||||||||
Current maturities of long-term debt
|
$ | 40,000 | 50,000 | |||||
Accounts payable
|
32,092 | 38,537 | ||||||
Current portion of deferred revenue
|
16,910 | 17,508 | ||||||
Other current liabilities
|
63,027 | 60,726 | ||||||
Liabilities held for sale - current
|
0 | 63,585 | ||||||
Total current liabilities
|
152,029 | 230,356 | ||||||
Deferred tax liabilities
|
75,861 | 99,795 | ||||||
Other liabilities
|
21,160 | 22,437 | ||||||
Long-term debt
|
0 | 122,000 | ||||||
Liabilities held for sale - other
|
0 | 16,026 | ||||||
Shareholders' equity
|
576,326 | 601,714 | ||||||
$ | 825,376 | 1,092,328 |
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||
Consolidated Statements of Cash Flows (Unaudited)
|
||||
(Dollars in thousands)
|
||||
|
||||
Six Months
Ended
March 31, 2014
|
||||
Cash flows from operating activities:
|
||||
Net loss
|
$ | (22,488 | ) | |
Adjustments to reconcile net loss
|
||||
to net cash provided by operating activities:
|
||||
Net loss from discontinued operations
|
40,584 | |||
Depreciation and amortization
|
8,113 | |||
Stock compensation expense
|
2,581 | |||
Changes in current assets and liabilities
|
(9,394 | ) | ||
Effect of deferred taxes
|
1,061 | |||
Change in deferred revenue and costs, net
|
(677 | ) | ||
Pension contributions
|
(1,120 | ) | ||
Change in uncertain tax position liability
|
(701 | ) | ||
Other
|
(1,241 | ) | ||
Net cash provided by operating activities - continuing operations
|
16,718 | |||
Net cash used by operating activities - discontinued operations
|
(1,629 | ) | ||
Net cash provided by operating activities
|
15,089 | |||
Cash flows from investing activities:
|
||||
Capital expenditures
|
(5,799 | ) | ||
Additions to capitalized software
|
(4,044 | ) | ||
Net cash used by investing activities - continuing operations
|
(9,843 | ) | ||
Net cash provided by investing activities - discontinued operations
|
123,512 | |||
Net cash provided by investing activities
|
113,669 | |||
Cash flows from financing activities:
|
||||
Proceeds from long-term debt
|
33,000 | |||
Principal payments on long-term debt
|
(165,000 | ) | ||
Dividends paid
|
(4,245 | ) | ||
Net cash used by financing activities
|
(136,245 | ) | ||
Effect of exchange rate changes on cash and cash equivalents
|
999 | |||
Net decrease in cash and cash equivalents
|
(6,488 | ) | ||
Cash and cash equivalents, beginning of period
|
42,850 | |||
Cash and cash equivalents, end of period
|
$ | 36,362 |
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||||||||||
Other Selected Financial Data (Unaudited)
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
|
||||||||||||||||
Backlog And Entered Orders - Q2 FY 2014
|
USG
|
Test
|
Filtration
|
Total
|
||||||||||||
Beginning Backlog - 1/1/14
|
$ | 22,910 | 81,943 | 156,376 | 261,229 | |||||||||||
Entered Orders
|
25,805 | 52,420 | 58,146 | 136,371 | ||||||||||||
Sales
|
(25,340 | ) | (41,025 | ) | (58,397 | ) | (124,762 | ) | ||||||||
Ending Backlog - 3/31/14
|
$ | 23,375 | 93,338 | 156,125 | 272,838 | |||||||||||
Backlog And Entered Orders - YTD Q2 FY 2014
|
USG
|
Test
|
Filtration
|
Total
|
||||||||||||
Beginning Backlog - 10/1/13
|
$ | 24,047 | 90,427 | 157,675 | 272,149 | |||||||||||
Entered Orders
|
54,162 | 83,414 | 112,325 | 249,901 | ||||||||||||
Sales
|
(54,834 | ) | (80,503 | ) | (113,875 | ) | (249,212 | ) | ||||||||
Ending Backlog - 3/31/14
|
$ | 23,375 | 93,338 | 156,125 | 272,838 | |||||||||||
Note: The above table is presented on a continuing operations basis and excludes Aclara.
|
ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
|
||||||||
Reconciliation of Non-GAAP Financial Measures (Unaudited)
|
||||||||
|
||||||||
EPS – Adjusted Basis Reconciliation – Q2 FY 2014
|
||||||||
EPS from Continuing Ops – GAAP Basis – Q2 2014
|
$ | 0.35 | ||||||
Adjustments (defined below)
|
0.01 | |||||||
EPS from Continuing Ops – As Adjusted Basis – Q2 2014
|
$ | 0.36 | ||||||
|
||||||||
Adjustments exclude $0.01 per share consisting of restructuring costs associated
|
||||||||
with the Filtration segment facility consolidation.
|
||||||||
|
||||||||
EPS – Adjusted Basis Reconciliation – YTD Q2 FY 2014
|
||||||||
EPS from Continuing Ops – GAAP Basis – YTD Q2 2014
|
$ | 0.68 | ||||||
Adjustments (defined below)
|
0.02 | |||||||
EPS from Continuing Ops – As Adjusted Basis – YTD Q2 2014
|
$ | 0.70 | ||||||
|
||||||||
Adjustments exclude $0.02 per share consisting of restructuring costs associated
|
||||||||
with the Filtration segment facility consolidation.
|
||||||||
|
||||||||
EPS – Adjusted Basis Reconciliation – FY 2014
|
||||||||
EPS from Continuing Ops – GAAP Basis – FY 2014
|
$ | 1.45 | 1.55 | |||||
Adjustments (defined below)
|
0.05 | 0.05 | ||||||
EPS from Continuing Ops – As Adjusted Basis – FY 2014
|
$ | 1.50 | 1.60 | |||||
|
||||||||
Adjustments exclude $0.05 per share consisting of restructuring costs associated
|
||||||||
with the Filtration segment facility consolidation.
|