ESCO Technologies Inc : ESCO Announces First Quarter 2013 Results

      ESCO Technologies Inc : ESCO Announces First Quarter 2013 Results

ST. LOUIS, February 7, 2013 - ESCO Technologies Inc. (NYSE: ESE) today
reported its operating results for the first quarter ended December 31, 2012.

As noted in the November 12, 2012 earnings release, the Company provided EPS
guidance for 2013 on an adjusted basis, which excluded certain costs
associated with the Test segment restructuring. Management believes EPS - "As
Adjusted" is a better indicator of the Company's 2013 performance and allows
shareholders better visibility into the underlying operations of the Company.

Summary Highlights

  *Q1 2013 EPS - "As Adjusted" was $0.05 per share, with GAAP EPS of $0.01
    per share compared to $0.19 in Q1 2012;

  *During Q1 2013, the Company recorded an additional $44 million in orders
    from Southern California Gas Company (SoCalGas), resulting in
    program-to-date orders of $139 million through December 31, 2012;

  *Subsequent to December 31, 2012, an additional $4 million in orders were
    received from SoCalGas;

  *Consolidated orders were $195 million in Q1 2013, resulting in a
    book-to-bill ratio of 1.34x, and firm backlog of $457 million at December
    31, 2012. Backlog increased $50million, or 12 percent, in Q1 2013 since
    September 30, 2012; 

  *Segment book-to-bill ratios for Q1 2013 were: Utility Solutions Group
    (USG) 1.52x, Filtration 1.23x, and Test 1.18x;

  *Consolidated Q1 2013 sales were $145 million compared to $153 million in
    Q1 2012, with Filtration increasing 7 percent, USG was lower due to the
    timing of power-line sales throughout the respective years, and Test was
    lower due to the timing of major projects;

  *SG&A decreased to $47 million in Q1 2013 from $49 million in Q1 2012
    primarily due to lower costs in USG as certain new product development
    (NPD) projects were completed in the second half of 2012, with the related
    products being introduced to the market. In addition, Test spending was
    lower as several cost savings initiatives were realized; and,

  *The 17 percent effective tax rate in Q1 2013 is the result of an
    insignificant discrete tax benefit ($50,000) being divided into the small
    pretax earnings amount.

Chairman's Commentary

Vic Richey, Chairman and Chief Executive Officer, commented, "I'm satisfied
with our operating results in the first quarter, with the highlights including
another strong quarter of entered orders, and the formal launch of the
SoCalGas deployment. Having all three segments reporting strong order growth
in the Quarter certainly bodes well for the balance of the year.

"I'm also pleased to note that we wrapped up the quarter with several pieces
of good news on the M&A front, with the acquisition of innovative smart grid
technologies from Metrum Technologies LLC, and the addition of the Finepoint
Circuit Breaker Conference to Doble's globally recognized industry conference
offerings. Each of these acquisitions adds to our ability to better serve our
customers in providing best-in-class solutions.

"Operationally, Filtration continued its outstanding performance on both the
top and bottom line, and Test came in as expected. The Test restructuring is
on plan and should be completed within the timeframe and cost parameters noted
earlier. Regarding orders and backlog, Test is off to a strong start in 2013
as several large projects were awarded in the first quarter. They included a
large domestic automotive test chamber and a project related to a new market
area for Test, where we are installing critical RF shielding at a large
utility's data center to prevent electro-magnetic pulse (EMP) interference,
thereby enhancing security and reliability. We expect this new market
initiative to grow over the next few years.

"USG was expected to be soft in the first quarter and the results reflect
that. Aclara was expected to report a loss as our cost structure is set up for
the sales volumes planned over the balance of the year. Additionally, we had a
modest headwind at Doble resulting from the East Coast storm that delayed some
product and service revenues as several large utilities across the Eastern
part of the country redirected their maintenance efforts to support the
restoration of power to those most affected. This was a timing issue impacting
Q1, and Doble does not expect this to impact its year.

"We expect to see sequential sales and EPS growth in each of the next three
quarters, and the second half of the year is expected to be significantly
higher than the first half. I remain excited about our growth in 2013 and our
commitment remains the same - to achieve our long-term goal of increasing
shareholder value."

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on April 18
to stockholders of record on April 4.

Share Repurchase Program

During the first quarter ended December 31, 2012, the Company spent
approximately $10million to repurchase approximately 270,000 shares, bringing
the total amounts repurchased under the current authorization to approximately
$15 million and 420,000 shares.

Business Outlook

Statements contained in the preceding and following paragraphs are based on
current expectations. Statements that are not strictly historical are
considered forward-looking, and actual results may differ materially.

Test Segment Restructuring

As described in the Company's November 12, 2012 release, Management announced
the restructuring of the Test segment, which included the closure of the
Glendale Heights, Illinois facility. Management previously announced it was
analyzing the operating cost structure across the Company to see where
improvements in operating efficiency could be achieved. This process was
undertaken to help protect and expand future operating margins, as well as to
supplement future EPS growth.

During Q1 2013, Test incurred $1 million of costs related to the Glendale
Heights facility lease buyout and severance. Total restructuring costs are
expected to be approximately $3million and will be incurred through March 31,
2013. As a result of these actions, the partial year cost savings in 2013 will
be approximately $1 million (excluding restructuring costs), and once
completed, are expected to yield recurring annual savings of approximately
$3million in 2014 and beyond. The net impact of this restructuring is
expected to increase Test segment EBIT margins above 13 percent beginning in

While further restructuring activities of this magnitude are not currently
expected, Management continues to review all of its other operations to ensure
that the respective businesses are properly sized to deliver the operating
results required to meet the earnings commitments previously communicated.

Fiscal Year 2013

Management's expectations for 2013 are consistent with the guidance presented
in the November 12, 2012 release.

Management continues to see strong growth in 2013 across the business. Based
on projected revenue growth of approximately 10 percent, Management expects
2013 EPS - "As Adjusted" in the range of $2.30 to $2.50 per share, which
excludes estimated Test segment restructuring charges. The 2013 effective tax
rate is expected to be 33 percent.

On a quarterly basis, Management expects 2013 revenues and EPS to be
significantly second half weighted. The first half of 2013 reflects the
initial deliveries to SoCalGas against the full operating infrastructure in
place to support the project. Additionally, the first half of 2013 is expected
to be lower than the first half of 2012 due to fewer electric COOP shipments
in 2013.

The anticipated sales and EPS growth in the second half of 2013 will be
supported by SoCalGas being in full deployment mode, Test having completed its
facility restructuring delivering higher margins, higher electric COOP
shipments (timing during the year), and the water business delivering at
higher levels than in the first half.

Conference Call

The Company will host a conference call today, February 7, at 4 p.m. Central
Time, to discuss the Company's first quarter 2013 operating results. A live
audio webcast will be available on the Company's website at 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 for seven days on the
Company's website noted above or by phone (dial 1-888-843-7419 and enter the
pass code 34018852).

Forward-Looking Statements

Statements in this press release regarding the amount and timing of the
Company's expected 2013 and beyond revenues, growth, margins, tax rates, EPS,
EBIT, sales, orders, the timing, size and success of the SoCalGas AMI project,
the costs, benefits and timing of the Test segment restructure, the amount and
timing of COOP shipments and water business, the likelihood of further
restructuring activities, new products, new market initiatives, the size,
number and timing of growth opportunities in the future, 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. 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 risk
factors described in Item 1A of the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2012; and the following: changes in
requirements or financial constraints impacting SoCalGas; the success of the
Company's competitors; changes in federal or state energy laws; the Company's
successful performance of its AMI contracts; site readiness issues with Test
segment customers; weakening of economic conditions in served markets; changes
in customer demands or customer insolvencies; competition; intellectual
property rights; technical difficulties; unforeseen charges impacting
corporate operating expenses; delivery delays or defaults by customers; the
performance of the Company's international operations; material changes in the
costs and availability of certain raw materials; termination for convenience
of customer contracts; timing and content of future contract awards and
customer orders; containment of engineering and development costs; performance
issues with key customers, suppliers and subcontractors; labor disputes; the
impacts of natural disasters such as hurricanes on the Company's operations
and those of the Company's customers and suppliers; changes in laws and
regulations, including but not limited to changes in accounting standards and
taxation requirements; costs relating to environmental matters arising from
current or former facilities; uncertainty regarding the ultimate resolution of
current disputes, claims, litigation or arbitration; the Company's successful
execution of internal restructuring plans; and the Company's ability to
successfully integrate newly-acquired businesses.

Non-GAAP Financial Measures

The financial measures EBIT, EBIT margin and EPS - "As Adjusted" are presented
in this press release. The Company defines EBIT as earnings before interest
and taxes from continuing operations, EBIT margin as a percent of net sales
and EPS - "As Adjusted" as GAAP EPS less the Test segment restructuring
charges (representing $0.04 per share during the first quarter of 2013). EBIT,
EBIT margin and EPS - "As Adjusted" are not recognized in accordance with U.S.
generally accepted accounting principles (GAAP). However, Management believes
that EBIT and EBIT margin are useful in assessing the operational
profitability of the Company's business segments because they exclude interest
and taxes, 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 Company believes that the presentation of EBIT, EBIT margin
and EPS - "As Adjusted" 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, is a proven supplier of special purpose
utility solutions for electric, gas, and water utilities, including hardware
and software to support advanced metering applications and fully automated
intelligent instrumentation. In addition, the Company provides engineered
filtration products to the aviation, space, and process markets worldwide and
is the industry leader in RF shielding and EMC test products. Further
information regarding ESCO and its subsidiaries is available on the Company's
website at

       Condensed Consolidated Statements of Operations (Unaudited)
            (Dollars in thousands, except per share amounts)
                                                Three Months  Three Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2012          2011
Net Sales                                     $      145,265       152,925
Cost and Expenses:
 Cost of sales                                        94,038        92,721
 Selling, general and administrative expenses         46,939        48,690
 Amortization of intangible assets                     3,500         3,153
 Interest expense                                        563           491
 Other (income) expenses, net                           (72)         (472)
          Total costs and expenses                   144,968       144,583
Earnings before income taxes                             297         8,342
Income taxes                                              51         3,135
          Net earnings                        $          246         5,207
Earnings per share:
                      Net earnings            $         0.01          0.20
                      Net earnings            $         0.01          0.19
Average common shares O/S:
          Basic                                       26,495        26,671
          Diluted                                     26,680        26,857


              Condensed Business Segment Information (Unaudited)
                            (Dollars in thousands)
                                                   Three Months Ended
                                                       December 31,
                                                   2012            2011
Net Sales
     Utility Solutions Group                  $     62,618          70,349
     Test                                           36,295          39,354
     Filtration                                     46,352          43,222
          Totals                              $    145,265         152,925
     Utility Solutions Group                  $    (2,208)           4,966
     Test                                              519           1,947
     Filtration                                      8,801           8,236
     Corporate                                     (6,252)   (1)   (6,316) (2)
          Consolidated EBIT                            860           8,833
          Less: Interest expense                     (563)           (491)
          Earnings before income taxes        $        297           8,342
Note:     Depreciation and amortization expense was $6.5 million and $6.0
          for the quarters ended December 31, 2012 and 2011, respectively.
 (1) Includes $0.9 million of amortization of acquired intangible assets.
 (2) Includes $1.2 million of amortization of acquired intangible assets.


              Condensed Consolidated Balance Sheets (Unaudited)
                            (Dollars in thousands)
                                                   December 31,  September 30,
                                                       2012          2012
    Cash and cash equivalents                    $       33,489         30,215
    Accounts receivable, net                            132,411        151,051
    Costs and estimated earnings on
                long-term contracts                      10,669         14,567
    Inventories                                         118,934        108,061
    Current portion of deferred tax assets               22,577         22,313
    Other current assets                                 25,551         17,237
                Total current assets                    343,631        343,444
    Property, plant and equipment, net                   79,806         75,876
    Intangible assets, net                              244,526        231,473
    Goodwill                                            388,352        361,280
    Other assets                                         22,516         21,680
                                                 $    1,078,831      1,033,753
Liabilities and Shareholders' Equity
    Short-term borrowings and current maturities
                of long-term debt                $       51,630         50,000
    Accounts payable                                     45,985         54,049
    Current portion of deferred revenue                  28,355         24,920
    Other current liabilities                            68,976         75,236
                Total current liabilities               194,946        204,205
    Deferred tax liabilities                             90,737         88,675
    Other liabilities                                    58,955         44,560
    Long-term debt                                      113,000         65,000
    Shareholders' equity                                621,193        631,313
                                                 $    1,078,831      1,033,753


                           (Dollars in thousands)
                                                               Three Months
                                                               December 31,
Cash flows from operating activities:
 Net earnings                                              $           246
 Adjustments to reconcile net earnings
  to net cash provided by operating activities:
    Depreciation and amortization                                 6,472
    Stock compensation expense                                    1,157
    Changes in current assets and liabilities                   (4,975)
    Effect of deferred taxes                                      1,798
    Change in deferred revenue and costs, net                   (1,073)
    Pension contributions                                         (730)
    Other                                                       (1,242)
     Net cash provided by operating activities                   1,653
Cash flows from investing activities:
 Acquisition of businesses, net of cash acquired                  (28,247)
 Capital expenditures                                              (5,348)
 Additions to capitalized software                                 (4,017)
   Net cash used by investing activities                        (37,612)
Cash flows from financing activities:
 Proceeds from long-term debt                                       53,630
 Principal payments on long-term debt                              (4,000)
 Dividends paid                                                    (2,132)
 Purchases of common stock into treasury                           (9,703)
 Other                                                                 463
  Net cash provided by financing activities                        38,258
Effect of exchange rate changes on cash and cash equivalents             975
Net increase in cash and cash equivalents                              3,274
Cash and cash equivalents, beginning of period                        30,215
Cash and cash equivalents, end of period                     $        33,489


                  Other Selected Financial Data (Unaudited)
                            (Dollars in thousands)
Backlog And Entered Orders - Q1      Utility     Test    Filtration    Total
FY 2013                             Solutions
    Beginning Backlog - 10/1/12   $   187,795    79,418     139,689    406,902
    Entered Orders                     95,082    42,837      57,151    195,070
    Sales                            (62,618)  (36,295)    (46,352)  (145,265)
    Ending Backlog - 12/31/12     $   220,259    85,960     150,488    456,707

SOURCE ESCO Technologies Inc.
Kate Lowrey, Director, Investor Relations, ESCO Technologies Inc.,
+1-314-213-7277; or Media, David P. Garino, +1-314-982-0551


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The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
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(ii) they are solely responsible for the content, accuracy and originality of
information contained therein.

Source: ESCO Technologies Inc via Thomson Reuters ONE
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