ESCO Technologies Inc : ESCO Announces Second Quarter 2013 Results

      ESCO Technologies Inc : ESCO Announces Second Quarter 2013 Results

ST. LOUIS, May 7, 2013 - ESCO Technologies Inc. (NYSE: ESE) today reported its
operating results for the second quarter ended March 31, 2013.

As noted in the November 12, 2012 earnings release, the Company would provide
its operating results (EPS) for 2013 on an adjusted basis, which excluded
certain costs associated with the Test segment restructuring. Additional
specific costs and charges were identified in the Company's April 17, 2013
Profit Improvement Plan announcement that will also be excluded from EPS "As
Adjusted" in 2013.

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.

During the second quarter, EPS "As Adjusted" reflects the add-back of $0.22
per share of non-operating charges related to the Test restructure ($0.03),
the deferred tax asset write-off related to the Doble-Lemke facility closure
($0.07), and the write-off of the Acendant Network inventory ($0.12).

Summary Highlights

  *Q2 2013 EPS "As Adjusted" was $0.28 per share, with GAAP EPS of $0.06 per
    share compared to $0.38 in Q2 2012;

  *During Q2 2013, the Company recorded an additional $12 million in orders
    from Southern California Gas Company (SoCalGas), resulting in
    program-to-date orders of $151 million through March 31, 2013;

  *Consolidated orders were $175 million in Q2 2013, resulting in a
    book-to-bill ratio of 1.05x, and firm backlog of $465 million at March 31,
    2013. Backlog increased $58million, or 14 percent, since September 30,

  *Segment book-to-bill ratios for Q2 and YTD 2013 were: Utility Solutions
    Group (USG) 1.10x and 1.29x, Filtration 0.97x and 1.09x, and Test 1.08x
    and 1.13x;

  *Consolidated Q2 2013 sales were $166 million compared to $174 million in
    Q2 2012, with Filtration increasing $5 million (10 percent), while USG
    decreased $2 million due to a lower volume of power-line sales partially
    offset by higher RF product sales, and Test was $11 million lower due to
    the timing of major projects within the comparable periods;

  *Q2 2013 cost of sales includes the $5.0 million inventory write-off noted

  *SG&A decreased to $46 million in Q2 2013 from $48 million in Q2 2012
    primarily due to lower costs in all three operating segments as several
    cost savings initiatives were realized; and,

  *The 56 percent effective tax rate in Q2 2013 is the result of the
    previously announced write-off of the Doble-Lemke deferred tax asset ($1.8
    million) resulting from the closure of its German facility.

The remainder of the previously announced costs and charges related to the
closure of the Doble-Lemke operation ($4.0 million) and the Aclara
manufacturing facility ($3.0 million) will be recognized over the next several
quarters in accordance with generally accepted accounting principles.

While further restructuring activities of this magnitude are not currently
expected, Management regularly reviews its ongoing operating costs to ensure
that the respective businesses are properly sized to deliver the operating
results required to meet the Company's earnings commitments.

Chairman's Commentary

Vic Richey, Chairman and Chief Executive Officer, commented, "Clearly the
highlight of the second quarter continues to be the strength of our orders and
the growth of our backlog. Operationally, the quarter was a bit softer than
originally planned, but I'm pleased that our shortfall is contained within one
of our operating segments, and is not a broad indication of an overall market
downturn across our operating platforms.

"We previously communicated that the overall AMI market is experiencing
project delays as customer decisions are stretching out over a longer period
of time when compared to the past. RFP evaluation processes and technology
piloting activity are running considerably longer than they have historically.
Aclara is not immune to the current market dynamic and as a result, the timing
of the current AMI projects remains difficult to predict.

"I'm very satisfied with our performance on the SoCalGas project which is
operating on schedule with the project continuing to increase volumes as
expected. The early system deployments are working as designed and the
customer relationship remains strong, evidenced by SoCal's additional $12
million of orders received in the quarter bringing the total commitment to
over $150 million.

"Our profit improvement initiatives are on track and we fully expect them to
be completed on time and on budget, with the corresponding savings being
realized as planned.

"Operationally, Filtration continued its outstanding performance on both the
top and bottom line, and Test came in generally as expected. We continue to
see Test's recently announced electro-magnetic pulse (EMP) interference market
developing ahead of plan and we remain excited about this new market's growth

"USG was expected to remain soft in the second quarter due to the Aclara items
noted and the results reflect that. Last quarter, we discussed some headwind
at Doble resulting from October's East Coast storm that delayed some product
and service revenues, and now that this has passed, we expect the second half
to resume to a more normal buying pattern at Doble.

Dividend Payment

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

Share Repurchase Program

Through March 31, 2013, 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

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.

Fiscal Year 2013

As referenced in the April 17, 2013 Profit Improvement Plan release,
Management indicated it was expecting lower sales and earnings for the balance
of 2013 compared to earlier guidance as a result project delays in the water
market and slower than expected COOP product deliveries.

Management continues to see strong and sustainable growth across the
Filtration businesses; Test is on track to meet its earlier commitments; and
Doble is expecting slightly lower revenues while generally maintaining its
profit plan. Aclara's water and COOP businesses are expected to be lower than
originally planned due to delayed customer decisions in the water market and
lower distributor demand impacting the COOP market as distributors reduce
their inventory levels. Management continues to believe the issues impacting
the water and COOP market are timing related and the overall market remains

Based on the lower revenue projections of higher margin products, Management
expects 2013 EPS - "As Adjusted" in the range of $1.60 to $1.80 per share.

For the balance of the year, Management expects 2013 revenues and EPS to be
significantly second half weighted. The first half of 2013 reflected lower
quantities of deliveries to SoCalGas against the full operating infrastructure
in place to support the project. Additionally, the first half of 2013 was
previously expected to be lower than the first half of 2012 due to fewer
electric COOP shipments in 2013.

While lower than earlier projected, the current expectations for 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 (compared to the first half due
to timing during the year), and the water business delivering at marginally
higher levels than in the first half.

Conference Call

The Company will host a conference call today, May 7, at 4 p.m. Central Time,
to discuss the Company's second 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 34424905).

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, 2013
EPS - "As Adjusted", EPS, EBIT, sales, orders, the timing, size and success of
the SoCalGas AMI project, the costs, benefits and timing of the profit
improvement initiatives and restructuring activities previously announced, the
amount and timing of COOP and water sales, the likelihood of further
restructuring activities, the success of new products, the buying patterns of
Doble customers, 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
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 profit improvement
initiatives and restructuring activities; 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 $0.03 per share during the second quarter of 2013), the
deferred tax asset write-off related to the Doble-Lemke facility closure
(representing $0.07 per share during the second quarter of 2013), and the
write-off of the Acendant Network inventory (representing $0.12 per share
during the second 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

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
                                                March 31, 2013  March 31, 2012
Net Sales                                     $        166,178         173,863
Cost and Expenses:
 Cost of sales                                         110,681         105,967
 Selling, general and administrative expenses           45,751          47,944
 Amortization of intangible assets                       4,203           3,254
 Interest expense                                          668             470
 Other (income) expenses, net                            1,330           (376)
         Total costs and expenses                      162,633         157,259
Earnings before income taxes                             3,545          16,604
Income taxes                                             1,986           6,402
         Net earnings                         $          1,559          10,202
Earnings per share:
                      Net earnings            $           0.06            0.38
                      Net earnings            $           0.06            0.38
Average common shares O/S:
         Basic                                          26,417          26,706
         Diluted                                        26,745          26,985


         Condensed Consolidated Statements of Operations (Unaudited)
              (Dollars in thousands, except per share amounts)
                                                  Six Months      Six Months
                                                    Ended           Ended
                                                March 31, 2013  March 31, 2012
Net Sales                                     $        311,443         326,788
Cost and Expenses:
 Cost of sales                                         204,719         198,688
 Selling, general and administrative expenses           92,690          96,634
 Amortization of intangible assets                       7,703           6,407
 Interest expense                                        1,231             961
 Other (income) expenses, net                            1,258           (848)
         Total costs and expenses                      307,601         301,842
Earnings before income taxes                             3,842          24,946
Income taxes                                             2,037           9,537
         Net earnings                         $          1,805          15,409
Earnings per share:
                      Net earnings            $           0.07            0.58
                      Net earnings            $           0.07            0.57
Average common shares O/S:
         Basic                                          26,460          26,689
         Diluted                                        26,763          26,940


            Condensed Business Segment Information (Unaudited)
                          (Dollars in thousands)
                           Three Months Ended         Six Months Ended
                                March 31,                  March 31,
                            2013          2012         2013         2012
Net Sales
   Utility Solutions
   Group                $   72,731        74,475      135,349      144,824
   Test                     39,821        50,483       76,116       89,837
   Filtration               53,626        48,905       99,978       92,127
        Totals          $  166,178       173,863      311,443      326,788
   Utility Solutions
   Group                $  (2,423)         9,101      (4,631)       14,067
   Test                      2,559         4,775        3,078        6,722
   Filtration               10,894         9,468       19,695       17,704
   Corporate               (6,817)  (1)  (6,270) (1) (13,069) (2) (12,586) (3)
        EBIT                 4,213        17,074        5,073       25,907
        Less: Interest
        expense              (668)         (470)      (1,231)        (961)
        before income
        taxes           $    3,545        16,604        3,842       24,946

Note:   Depreciation and amortization expense was $7.3 million and $6.3
        million for the quarters
        ended March 31, 2013 and 2012, respectively, and $13.8 million and
        $12.3 million for the
        six-month periods ended March 31, 2013 and 2012, respectively.
    (1) Includes $1.1 million of amortization of acquired
        intangible assets.
    (2) Includes $2.0 million of amortization of acquired
        intangible assets.
    (3) Includes $2.3 million of amortization of acquired
        intangible assets.


              Condensed Consolidated Balance Sheets (Unaudited)
                            (Dollars in thousands)
                                                   March 31,   September 30,
                                                      2013           2012
    Cash and cash equivalents                   $        35,880         30,215
    Accounts receivable, net                            141,154        151,051
    Costs and estimated earnings on
                long-term contracts                      15,523         14,567
    Inventories                                         117,497        108,061
    Current portion of deferred tax assets               22,706         22,313
    Other current assets                                 38,699         17,237
                Total current assets                    371,459        343,444
    Property, plant and equipment, net                   80,699         75,876
    Intangible assets, net                              244,392        231,473
    Goodwill                                            387,630        361,280
    Other assets                                         21,327         21,680
                                                $     1,105,507      1,033,753
Liabilities and Shareholders' Equity
    Short-term borrowings and current
                of long-term debt               $        51,698         50,000
    Accounts payable                                     50,237         54,049
    Current portion of deferred revenue                  40,149         24,920
    Other current liabilities                            67,254         75,236
                Total current liabilities               209,338        204,205
    Deferred tax liabilities                             92,790         88,675
    Other liabilities                                    56,021         44,560
    Long-term debt                                      126,000         65,000
    Shareholders' equity                                621,358        631,313
                                                $     1,105,507      1,033,753


                           (Dollars in thousands)
                                                                Six Months
                                                               March 31, 2013
Cash flows from operating activities:
 Net earnings                                              $          1,805
 Adjustments to reconcile net earnings
  to net cash provided by operating activities:
    Depreciation and amortization                                 13,796
    Stock compensation expense                                     2,434
    Changes in current assets and liabilities                   (27,470)
    Inventory write down                                           5,045
    Effect of deferred taxes                                       3,722
    Change in deferred revenue and costs, net                      3,811
    Pension contributions                                        (1,755)
    Other                                                            676
     Net cash provided by operating activities                    2,064
Cash flows from investing activities:
 Acquisition of businesses, net of cash acquired                   (28,247)
 Capital expenditures                                              (10,117)
 Additions to capitalized software                                  (7,665)
   Net cash used by investing activities                         (46,029)
Cash flows from financing activities:
 Proceeds from long-term debt                                        77,698
 Principal payments on long-term debt                              (15,000)
 Dividends paid                                                     (4,244)
 Purchases of common stock into treasury                            (9,703)
 Proceeds from exercise of stock options                              1,739
 Other                                                                 (49)
  Net cash provided by financing activities                         50,441
Effect of exchange rate changes on cash and cash equivalents            (811)
Net increase in cash and cash equivalents                               5,665
Cash and cash equivalents, beginning of period                         30,215
Cash and cash equivalents, end of period                     $         35,880


                  Other Selected Financial Data (Unaudited)
                            (Dollars in thousands)
Backlog And Entered Orders - Q2     Utility     Test    Filtration    Total
FY 2013                            Solutions
         Beginning Backlog -     $   220,259    85,960     150,488    456,707
         Entered Orders               79,736    43,084      51,826    174,646
         Sales                      (72,731)  (39,821)    (53,626)  (166,178)
         Ending Backlog -        $   227,264    89,223     148,688    465,175
Backlog And Entered Orders - YTD    Utility     Test    Filtration    Total
Q2 FY 2013                         Solutions
         Beginning Backlog -     $   187,795    79,418     139,689    406,902
         Entered Orders              174,818    85,921     108,977    369,716
         Sales                     (135,349)  (76,116)    (99,978)  (311,443)
         Ending Backlog -        $   227,264    89,223     148,688    465,175

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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(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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