Business Segment Information

12 Months Ended

Sep. 30, 2020

Business Segment Information

Business Segment Information

14.      Business Segment Information

The Company is organized based on the products and services it offers and classifies its continuing business operations in three reportable segments for financial reporting purposes: Aerospace & Defense (formerly called Filtration/Fluid Flow), Utility Solutions Group (USG) and RF Shielding and Test (Test). The former Technical Packaging segment was divested in December 2019 and has been reflected as discontinued operations for 2020.

The Aerospace & Defense segment’s operations consist of PTI Technologies Inc. (PTI), VACCO Industries (VACCO), Crissair, Inc. (Crissair), Mayday Manufacturing Co. (Mayday), Hi-Tech Metals, Inc. (Hi-Tech), Westland Technologies, Inc. (Westland), and Globe Composite Solutions, LLC (Globe).The companies within this segment primarily design and manufacture specialty filtration and naval products, including hydraulic filter elements and fluid control devices used in aerospace and defense applications, unique filter mechanisms used in micro-propulsion devices for satellites and custom designed filters for manned aircraft and submarines, products and systems to reduce vibration and/or acoustic signatures and otherwise reduce or obscure a vessel’s signature, and other communications, sealing, surface control and hydrodynamic related applications to enhance U.S. Navy maritime survivability; precision-tolerance machined components for the aerospace and defense industry; and metal processing services.

The USG segment’s operations consist of Doble Engineering Company and related subsidiaries including Morgan Schaffer (collectively, Doble), and NRG Systems, Inc. (NRG). Doble is an industry leader in the development, manufacture and delivery of diagnostic testing and data management solutions that enable electric power grid operators to assess the integrity of high-voltage power delivery equipment. NRG designs and manufactures decision support tools for the renewable energy industry, primarily wind and solar.

The Test segment's operations consist of ETS-Lindgren Inc. and related subsidiaries (ETS-Lindgren). ETS-Lindgren is an industry leader in providing its customers with the ability to identify, measure and contain magnetic, electromagnetic and acoustic energy. ETS-Lindgren also manufactures radio frequency shielding products and components used by manufacturers of medical equipment, communications systems, electronic products, and shielded rooms for high-security data processing and secure communication.

Accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 to the Consolidated Financial Statements. The operating units within each reporting segment have been aggregated because of similar economic characteristics and meet the other aggregation criteria of FASB ASC 280.

The Company evaluates the performance of its operating units based on EBIT, which is defined as earnings before interest and taxes. EBIT on a consolidated basis is a non-GAAP financial measure; see “Non-GAAP Financial Measures” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Intersegment sales and transfers are not significant. Segment assets consist primarily of customer receivables, inventories, capitalized software and fixed assets directly associated with

the production processes of the segment. Segment depreciation and amortization is based upon the direct assets listed above. The tables below are presented on the basis of continuing operations and exclude discontinued operations.

Net Sales

(Dollars in millions)
Year ended September 30,	2020		2019	2018
Aerospace & Defense	$	354.3	325.7	286.8
USG		191.7	211.9	214.0
Test		186.9	188.4	182.9
Consolidated totals	$	732.9	726.0	683.7

One customer exceeded 10% of sales in 2020 and no customer exceeded 10% of sales in 2019.

EBIT

(Dollars in millions)
Year ended September 30,	2020		2019	2018
Aerospace & Defense	$	73.2	70.1	58.7
USG		24.4	52.2	43.2
Test		27.2	25.6	23.8
Reconciliation to consolidated totals (Corporate)		(78.3)	(41.9)	(35.8)
Consolidated EBIT		46.5	106.0	89.9
Less: interest expense		(6.7)	(8.1)	(8.8)
Earnings before income tax	$	39.8	97.9	81.1

Identifiable Assets

(Dollars in millions)
Year ended September 30,	2020		2019
Aerospace & Defense	$	279.5	260.3
USG		144.8	146.3
Test		153.0	154.2
Corporate – goodwill		408.1	390.3
Corporate – other assets		388.1	422.9
Assets from discontinued operations		–	92.7
Consolidated totals	$	1,373.5	1,466.7

Corporate other assets consist primarily of deferred taxes, acquired intangible assets and cash balances.

Capital Expenditures

(Dollars in millions)
Year ended September 30,	2020		2019	2018
Aerospace & Defense	$	15.9	11.7	7.0
USG		12.4	8.5	5.2
Test		3.6	4.0	3.0
Corporate		0.2	—	—
Consolidated totals	$	32.1	24.2	15.2

In addition to the above amounts, the Company incurred expenditures for capitalized software of $9.0 million, $8.4 million and $9.5 million in 2020, 2019 and 2018, respectively.

Depreciation and Amortization

(Dollars in millions)
Year ended September 30,	2020		2019	2018
Aerospace & Defense	$	9.4	8.3	7.6
USG		14.4	11.3	11.0
Test		5.0	5.1	4.5
Corporate		12.5	11.3	10.6
Consolidated totals	$	41.3	36.0	33.7

Depreciation expense of property, plant and equipment was $19.5 million, $16.5 million and $15.4 million for 2020, 2019 and 2018, respectively.

Geographic Information

Net Sales

(Dollars in millions)
Year ended September 30,	2020		2019	2018
United States	$	531.9	537.2	495.8
Asia		96.3	86.2	92.6
Europe		51.3	45.0	41.3
Canada		31.7	33.0	30.2
India		10.3	11.7	9.4
Other		11.4	12.9	14.4
Consolidated totals	$	732.9	726.0	683.7

Long-Lived Assets

(Dollars in millions)
Year ended September 30,	2020		2019
United States	$	131.5	120.7
Mexico		3.1	1.8
Other		5.3	5.3
Consolidated totals	$	139.9	127.8

Net sales are attributed to countries based on location of customer. Long-lived assets are attributed to countries based on location of the asset.