StockSelector.com
  Research, Select, & Monitor Wednesday, October 23, 2019 1:21:52 AM ET  
Trade Ideas The Market Industries Stocks Portfolio

 
Ticker Lookup
ESCO Technologies Inc.$83.55$.14.17%

  Quote | Ranking | Chart | Valuations | Sentiment | Industry | News | Earnings | Analysts | More...

Your Target?

 ESCO Announces Third Quarter Fiscal 2019 Results
   Thursday, August 08, 2019 4:15:00 PM ET

St. Louis, Aug. 08, 2019 (GLOBE NEWSWIRE) -- ESCO Technologies Inc. (NYSE: ESE) (ESCO, or the Company) today reported its operating results for the third quarter ended June 30, 2019 (Q3 2019), compared to the quarter ended June 30, 2018 (Q3 2018).

The financial results presented include certain non-GAAP financial measures such as EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS, as defined within the “Non-GAAP Financial Measures” described below. Any non-GAAP financial measures presented are reconciled to their respective GAAP equivalents.

Management believes these non-GAAP financial measures are useful in assessing the ongoing operational profitability of the Company’s business segments, and therefore, allow shareholders better visibility into the Company’s underlying operations. See “Non-GAAP Financial Measures” described below.



Earnings Summary

Q3 2019 GAAP EPS of $0.77 per share included $0.04 per share of previously described cost reduction charges in Technical Packaging and at Doble, and costs incurred to move the aircraft / aerospace business from VACCO to PTI. The $0.04 per share was excluded when determining Q3 2019 Adjusted EPS of $0.81 per share. GAAP net earnings were $20 million in Q3 2019.

Q3 2018 GAAP EPS and Adjusted EPS were $0.73 per share with GAAP net earnings of $19 million.

Q3 2019 Adjusted EPS of $0.81 per share exceeded Management’s previous guidance of $0.75 to $0.80 per share, and increased 11 percent over Q3 2018 Adjusted EPS of $0.73 per share.

Adjusted EBITDA was $38 million in Q3 2019, reflecting a 9 percent increase over Q3 2018 Adjusted EBITDA of $35 million.

YTD 2019 GAAP EPS was $2.15 per share (favorably impacted by the gain on the Doble building sale) compared to YTD 2018 GAAP EPS of $2.45 per share (favorably impacted by the one-time benefit recognized as a result of U.S. Tax Reform).

YTD 2019 Adjusted EPS increased 32 percent to $2.04 per share compared to $1.55 per share YTD 2018. Adjusted EPS in both periods excludes the one-time gains net of certain restructuring charges identified earlier.

YTD 2019 Adjusted EBITDA was $100 million, reflecting a 15 percent increase over YTD 2018 Adjusted EBITDA of $87 million.

Operating Highlights

  • Q3 2019 sales increased 4 percent to $200 million compared to $192 million in Q3 2018 and YTD 2019 sales increased 7 percent to $576 million compared to $540 million YTD 2018.
  • On a segment basis, Q3 2019 Filtration sales exceeded expectations and increased 19 percent from Q3 2018 with all operating units contributing to the growth driven by significantly higher aerospace (commercial and defense) and navy sales. Test sales decreased in Q3 2019 as a result of the timing of the completion of large projects within the respective periods. USG sales from Doble increased 8 percent, while NRG’s sales to renewable energy customers decreased, resulting in a net decrease in USG sales. Technical Packaging sales were generally flat due to the timing of new product introductions.
  • SG&A expenses increased in Q3 2019 compared to Q3 2018 primarily as a result of higher sales commissions and normal cost of living adjustments, partially offset by cost reductions.
  • Entered orders were $196 million in Q3 2019 (book-to-bill of 0.98x) and were $626 million YTD 2019 (book-to-bill of 1.09x) which resulted in an ending backlog of $432 million at June 30, 2019, an increase of $50 million, or 13 percent, from September 30, 2018.
  • The Q3 2019 effective income tax rate was generally consistent with the rate in Q3 2018.
  • 2019 net cash provided by operating activities was $37 million resulting in $179 million of net debt outstanding (total borrowings less cash on hand) at June 30, 2019, and a 1.5x leverage ratio. Cash flow in Q3 was negatively impacted by the timing of several large cash receipts at VACCO related to Navy projects in process which will be received in Q4 2019.

Chairman’s Commentary – Q3 2019

Vic Richey, Chairman and Chief Executive Officer, commented, “I’m pleased with our Q3 operating results, which once again came in above expectations and resulted in Adjusted EPS exceeding the top end of our guidance range. Solid operational performance across the Company drove the Q3 results as all four operating segments exceeded their Adjusted EBIT commitments during the Quarter. Our Filtration businesses exceeded our profit expectations by over 12 percent, and Doble, within the USG segment, beat expectations on higher than expected sales in Q3.

“Comparing Q3 2019 to Q3 2018, we increased sales by 4 percent driven by the nearly 20 percent sales growth in Filtration, partially muted by the timing of sales recognized on a few large projects in the Test business, and continued headwinds in our renewable energy business.

“We improved our YTD 2019 Adjusted EBITDA by 15 percent as every operating segment improved their margins over YTD 2018. Our outlook for the balance of the year remains solid.

“We announced the acquisition of Globe Composite Solutions, LLC (Globe) in early July and I’m very happy with the progress we are making in bringing them on board. The initial phases of integration are off to a great start and I’m excited to work with the outstanding leadership team and the dedicated employees that I met earlier this month. Globe’s products, processes and customer relationships are an excellent addition to our portfolio and our complementary skill sets will allow us to create additional avenues for meaningful growth across our shared customer base.

“On the M&A front we continue to evaluate a robust pipeline of opportunities in both Filtration and USG and continue to work these aggressively, and I remain hopeful that we will be able to add to our portfolio in the near future. Consistent with our history, we will remain prudent and committed to our disciplined approach of balancing ROIC and protecting our balance sheet.

“The Doble headquarters relocation from Watertown to Marlborough is going smoothly and we expect to be moved in and fully operational by December 31, 2019. The Doble team is looking forward to having all of its Boston area staff co-located in a single, customer-friendly facility as we all believe this will further enhance our operational efficiency and effectiveness, while lowering our facility operating costs.

“As we look to wrap up 2019, we plan to build on the successes we achieved this year and expect to continue benefitting from our disciplined operating culture and our lower cost structure. Our solid market positions and tangible growth opportunities across the Company provide us with a favorable view of the future with our goal remaining unchanged – to increase long-term shareholder value.”

Dividend Payment

The next quarterly cash dividend of $0.08 per share will be paid on October 17, 2019 to stockholders of record on October 3, 2019.

Previously Disclosed Cost Reduction / Restructuring Actions

Refer to the Company’s November 15, 2018 earnings release for details of the cost reduction and restructuring actions related to the Doble building sale and relocation, Technical Packaging’s cost reduction actions, and VACCO’s aircraft / aerospace business move to PTI.

All of these actions are intended to improve operating efficiency, enhance ROIC, generate additional free cash flow, and enhance the Company’s competitiveness across several end-markets, thereby, accelerating sales and earnings growth in the future.

Updated Business Outlook – 2019

Management’s expects 2019 Adjusted EPS in the range of $3.05 to $3.10 per share, which is consistent with the details outlined in the Business Outlook presented in the May 7, 2019 release. The expected operating results from the previously announced acquisition of Globe are not reflected in the Adjusted EPS range noted above as Globe’s detailed financial plan is currently in the process of being finalized.

The timing of quarterly sales and earnings throughout 2019 compared to 2018 impacts the quarterly comparisons as 2019’s growth is more balanced on a quarterly basis compared to the heavily weighted second half profile reported in 2018.

Conference Call

The Company will host a conference call today, August 8, at 4:00 p.m. Central Time, to discuss the Company’s Q3 2019 results. A live audio webcast will be available on the Company’s website at www.escotechnologies.com . 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 on the Company’s website noted above or by phone (dial 1-855-859-2056 and enter the pass code 3855869).

Forward-Looking Statements

Statements in this press release regarding the timing and amounts of the Company’s expected quarterly, 2019 full year and beyond results, revenue and sales growth, EPS, Adjusted EPS, EPS growth, cash, EBIT, Adjusted EBIT, EBITDA, Adjusted EBITDA, the realization of operational efficiencies, the Company’s competitiveness and the costs and savings resulting from operational improvements and cost reduction actions, the Company’s ability to increase operating margins, realize financial goals and increase shareholder value, the success of acquisition efforts, 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 them except as may be required by applicable laws or regulations. 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 those described in Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, and the following: the success of the Company’s competitors; weakening of economic conditions in served markets; changes in customer demands or customer insolvencies; competition; intellectual property rights; technical difficulties; delivery delays or defaults by customers; material changes in the costs and availability of certain raw materials; the appropriation, allocation and availability of Government funds; the termination for convenience of Government and other customer contracts; the timing and content of future contract awards or customer orders; 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, taxation requirements, and new or modified tariffs; changes in interest rates; costs relating to environmental matters arising from current or former facilities; financial exposure in connection with Company guarantees of certain Aclara contracts; the availability of select acquisitions; and the uncertainty regarding the ultimate resolution of current disputes, claims, litigation or arbitration.

Non-GAAP Financial Measures

The financial measures EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are presented in this press release. The Company defines “EBIT” as earnings before interest and taxes, “EBITDA” as earnings before interest, taxes, depreciation and amortization, “Adjusted EBITDA” as EBITDA excluding certain defined charges, and “Adjusted EPS” as GAAP earnings per share (EPS) excluding the net impact of the items described above which were $0.04 per share in Q3 2019.

EBIT, EBITDA, Adjusted EBITDA and Adjusted EPS are not recognized in accordance with U.S. generally accepted accounting principles (GAAP). However, Management believes that EBIT, EBITDA and Adjusted EBITDA are useful in assessing the operational profitability of the Company’s business segments because they exclude interest, taxes, depreciation and amortization, 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, EBITDA, Adjusted EBITDA and Adjusted EPS 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, Missouri: Manufactures highly-engineered filtration and fluid control products for the aviation, space and process markets worldwide; is the industry leader in RF shielding and EMC test products; provides diagnostic instruments, software and services for the benefit of industrial power users and the electric utility and renewable energy industries; and, produces custom thermoformed packaging, pulp-based packaging, and specialty products for medical and commercial markets. Further information regarding ESCO and its subsidiaries is available on the Company’s website at www.escotechnologies.com .
  
  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
 (Dollars in thousands, except per share amounts)
 
     Three Months
Ended
June 30,
2019
  Three Months
Ended
June 30,
2018
         
Net Sales  $199,766  192,223 
Cost and Expenses:     
 Cost of sales 122,172  122,805 
 Selling, general and administrative expenses43,400  39,910 
 Amortization of intangible assets 4,693  4,605 
 Interest expense 1,973  2,243 
 Other (income) expenses, net 2,636  (656)
  Total costs and expenses 174,874  168,907 
         
Earnings before income taxes 24,892  23,316 
Income taxes 4,825  4,297 
         
  Net earnings$20,067  19,019 
         
         
  Diluted EPS - GAAP$0.77  0.73 
         
  Diluted EPS - As Adjusted$0.81(1) 0.73 
         
  Diluted average common shares O/S: 26,109  26,050 
         
(1)Q3 2019 Adjusted EPS excluded $0.04 per share net impact of restructuring charges incurred primarily at Plastique, Doble and PTI/VACCO during the third quarter of 2019.

  

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES 
Condensed Consolidated Statements of Operations (Unaudited) 
 (Dollars in thousands, except per share amounts) 
   
     Nine Months
Ended
June 30,
2019
  Nine Months
Ended
June 30,
2018
 
          
Net Sales$576,312   540,496  
Cost and Expenses:      
 Cost of sales 363,026   346,911  
 Selling, general and administrative expenses 126,066   122,813  
 Amortization of intangible assets 13,965   13,615  
 Interest expense 5,788   6,464  
 Other (income) expenses, net (2,037)  992  
  Total costs and expenses 506,808   490,795  
          
Earnings before income taxes 69,504   49,701  
Income taxes 13,323   (13,983) 
          
  Net earnings$56,181   63,684  
          
          
  Diluted EPS - GAAP$2.15   2.45  
          
  Diluted EPS - As Adjusted$2.04 (1) 1.55 (2)
          
  Diluted average common shares O/S: 26,090   26,042  
          
(1)YTD Q3 2019 Adjusted EPS excluded $0.11 per share net impact mainly from the gain on the sale of the Doble Watertown property partially offset by certain restructuring charges primarily at Plastique, PTI/VACCO & Doble.
          
(2)YTD Q3 2018 Adjusted EPS excluded $0.90 per share net impact of the $25 million tax benefit recorded related to U.S. Tax Reform partially offset by restructuring charges incurred at Doble & PTI during the first nine months of 2018.

  

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
 
    GAAP As Adjusted
    Q3 2019 Q3 2018 Q3 2019 Q3 2018
Net  Sales         
 Filtration$83,067  69,721  83,067  69,721 
 Test 42,298  45,034  42,298  45,034 
 USG 52,894  55,489  52,894  55,489 
 Technical Packaging 21,507  21,979  21,507  21,979 
  Totals$199,766  192,223  199,766  192,223 
           
EBIT         
 Filtration$19,039  14,292  19,344  14,292 
 Test 5,927  5,902  5,927  5,902 
 USG 10,148  11,528  10,467  11,528 
 Technical Packaging 1,625  2,505  2,268  2,505 
 Corporate (9,874) (8,668) (9,679) (8,668)
  Consolidated EBIT 26,865  25,559  28,327  25,559 
  Less: Interest expense (1,973) (2,243) (1,973) (2,243)
  Less: Income tax expense(4,825) (4,297) (5,126) (4,297)
  Net earnings$20,067  19,019  21,228  19,019 
           
Note 1: Adjusted net earnings were $21.2 million in Q3 '19 which excluded $1.4 million (or $0.04 per share) net impact of the restructuring charges incurred at Doble, Plastique, PTI and VACCO during the third quarter of 2019.
           
EBITDA Reconciliation to Net earnings:      
        Adjusted  
    Q3 2019 Q3 2018 Q3 2019  
Consolidated EBITDA$36,849  35,111  38,311   
Less: Depr & Amort (9,984) (9,552) (9,984)  
Consolidated EBIT 26,865  25,559  28,327   
Less: Interest expense (1,973) (2,243) (1,973)  
Less: Income tax expense (4,825) (4,297) (5,126)  
Net earnings$20,067  19,019  21,228   
           

  

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Business Segment Information (Unaudited)
(Dollars in thousands)
 
    GAAP As Adjusted 
    YTD Q3 YTD Q3 YTD Q3 YTD Q3 
           2019        2018        2019       2018  
Net  Sales          
 Filtration$228,769  195,531  228,769  195,531  
 Test 126,459  123,368  126,459  123,368  
 USG 157,639  157,942  157,639  157,942  
 Technical Packaging 63,445  63,655  63,445  63,655  
  Totals$576,312  540,496  576,312  540,496  
            
EBIT          
 Filtration$47,092  35,056  47,857  35,504  
 Test 14,791  13,797  14,791  13,797  
 USG 40,461  27,805  33,567  30,074  
 Technical Packaging 3,333  5,355  4,664  5,355  
 Corporate (30,385) (25,848) (29,716) (25,977) 
  Consolidated EBIT 75,292  56,165  71,163  58,753  
  Less: Interest expense (5,788) (6,464) (5,788) (6,464) 
  Less: Income tax (13,323) 13,983  (12,025) (11,002) 
  Net earnings$56,181  63,684  53,350  41,287  
            
Note 1: Adjusted net earnings were $53.4 million in YTD Q3 '19 which excluded $2.8 million (or $0.11 per share) net impact of the gain on the sale of the Doble Watertown property partially offset by charges related to restructuring actions at Doble, Plastique, PTI & VACCO.
            
Note 2: Adjusted net earnings were $41.3 million in YTD Q3 '18 which excluded $2.7 million (or $0.10 per share) net impact of the restructuring charges incurred at Doble and PTI during the first nine months of 2018, and the $25 million (or $1.00 per share) tax benefit recorded related to U.S. Tax Reform.
            
EBITDA Reconciliation to Net earnings:       
        Adjusted Adjusted 
    YTD Q3 YTD Q3 YTD Q3 YTD Q3 
           2019        2018        2019        2018  
Consolidated EBITDA$104,055  84,515  99,926  87,103  
Less: Depr & Amort (28,763) (28,350) (28,763) (28,350) 
Consolidated EBIT 75,292  56,165  71,163  58,753  
Less: Interest expense (5,788) (6,464) (5,788) (6,464) 
(Less) Plus: Income tax (13,323) 13,983  (12,025) (11,002) 
Net earnings$56,181  63,684  53,350  41,287  
            

   

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
 
    June 30,
2019
 September 30,
2018
       
Assets     
 Cash and cash equivalents$38,956 30,477
 Accounts receivable, net 168,675 163,740
 Contract assets 99,499 53,034
 Inventories 126,816 135,416
 Other current assets 16,260 13,356
  Total current assets 450,206 396,023
 Property, plant and equipment, net 151,545 134,954
 Intangible assets, net 336,625 345,353
 Goodwill 381,683 381,652
 Other assets 6,036 7,140
   $1,326,095 1,265,122
       
Liabilities and Shareholders' Equity    
 Short-term borrowings and current$20,921 20,000
  maturities of long-term debt    
 Accounts payable 59,329 63,033
 Contract liabilities 53,758 49,035
 Other current liabilities 65,728 68,462
  Total current liabilities 199,736 200,530
 Deferred tax liabilities 66,286 64,794
 Other liabilities 51,266 40,388
 Long-term debt 197,000 200,000
 Shareholders' equity 811,807 759,410
   $1,326,095 1,265,122

  

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
 
   Nine Months Ended
June 30, 2019
Cash flows from operating activities:  
  Net earnings$56,181 
  Adjustments to reconcile net earnings  
  to net cash provided by operating activities:  
  Depreciation and amortization 28,763 
  Stock compensation expense 3,878 
  Changes in assets and liabilities (41,851)
  Change in PP&E from gain on building sale (8,922)
  Pension contributions (2,500)
  Effect of deferred taxes 1,492 
  Net cash provided by operating activities 37,041 
   
Cash flows from investing activities:  
  Acquisition of business (937)
  Capital expenditures (26,457)
  Additions to capitalized software (6,207)
  Proceeds from sale of building and land 17,201 
  Net cash used by investing activities (16,400)
   
Cash flows from financing activities:  
  Proceeds from long-term debt and short-term borrowings 32,921 
  Principal payments on long-term debt (35,000)
  Dividends paid (6,223)
  Other (3,234)
  Net cash used by financing activities (11,536)
   
Effect of exchange rate changes on cash and cash equivalents (626)
   
Net increase in cash and cash equivalents 8,479 
Cash and cash equivalents, beginning of period 30,477 
Cash and cash equivalents, end of period$38,956 

  

  

ESCO TECHNOLOGIES INC. AND SUBSIDIARIES
Other Selected Financial Data (Unaudited)
(Dollars in thousands)
 
Backlog And Entered Orders - Q3 FY 2019 Filtration Test USG Technical
Packaging
 Total
 Beginning Backlog - 4/1/19$243,007  141,205  39,019  12,832  436,063 
 Entered Orders 71,210  44,128  55,404  25,412  196,154 
 Sales  (83,067) (42,298) (52,894) (21,507) (199,766)
 Ending Backlog - 6/30/19$231,150  143,035  41,529  16,737  432,451 
             
             
             
Backlog And Entered Orders - YTD Q3 FY 2019 Filtration Test USG Technical
Packaging
 Total
 Beginning Backlog - 10/1/18$204,227  122,350  40,727  15,467  382,771 
 Entered Orders 255,692  147,144  158,441  64,715  625,992 
 Sales  (228,769) (126,459) (157,639) (63,445) (576,312)
 Ending Backlog - 6/30/19$231,150  143,035  41,529  16,737  432,451 

SOURCE ESCO Technologies Inc.
Kate Lowrey, Director of Investor Relations, (314) 213-7277

Source: ESCO Technologies Inc.


Register |  Password |  Feedback |  Copyright |  Usage Agreement |  Privacy Policy |  Advertising |  About Us |  Contact Us |  FAQ 

Past performance is not indicative of future results

StockSelector.com, the StockSelector.com logo, and News Selects are trademarks of StockSelector.com.
Copyright © 1998 - 2019 StockSelector.com. All rights reserved.